The Brazilian Central Bank has recently expressed its concerns regarding the market’s inflation expectations. Despite the data indicating a moderation in inflation, the financial markets continue to anticipate high inflation. This viewpoint is shared by several bank officials, suggesting a consensus on the issue within the bank.

Roberto Campos Neto, the chief of Brazil’s central bank, believes that time will help in mitigating the “noises” that have led to an increase in market inflation expectations. He made these remarks at an event in Sao Paulo. The central bank officials have been warning about the rising inflation expectations in the country, even though the inflation figures have been better than expected.

Gabriel Galipolo, the monetary policy director, spoke about the additional challenges brought about by global liquidity restrictions in a high-interest-rate environment in advanced economies. He mentioned that Brazil is in a slightly more delicate situation as changes in the terminal rate have been observed, but unanchoring inflation expectations continue.

Private economists, who are surveyed weekly by the central bank, have raised their year-end projections for the Selic benchmark interest rate to 10.25%. They have also increased their inflation projections to 3.88% for this year, 3.77% for 2025, and 3.60% for 2026. These figures are compared with the official target of 3%.

Campos Neto stated that the central bank did not signal any future steps in its latest policy decision in May to gain time to understand the international scenario. He emphasized the dichotomy between good inflation figures and worse inflation expectations in Brazil.

The Brazilian Central Bank is aligned over the concern about market inflation expectations. The bank officials are working towards understanding and managing the inflation expectations in the country.