SÃO PAULO, Feb 6 (Reuters) - Brazil's Finance Minister is optimistic about inflation outcomes this year amidst a tightening monetary policy by the central bank. However, in an interview aired late on Wednesday, he acknowledged that the annual rate is likely to remain above 4.5% until June.
Fernando Haddad informed GloboNews that projections of a strong crop yield this year and the recent strengthening of the Brazilian real against the U.S. dollar, following record lows in December, are expected to help stabilize inflation.
Current private economist surveys conducted by the central bank anticipate that inflation in Latin America's largest economy will close 2025 at 5.51%, surpassing the upper limit of the monetary authority's 1.5% to 4.5% target range.
"I believe we may experience positive surprises compared to market expectations, similar to what occurred with the GDP," Haddad noted, referring to Brazil's stronger-than-expected economic performance in 2024.
While acknowledging that inflation is likely to remain above 4.5% by June, as projected during the latest monetary policy meeting by the central bank, Haddad attributed this to the delayed impact of tighter monetary measures. He expressed confidence that once prices begin to ease, the adjustment will be "much swifter" than anticipated by many in the financial market.
Brazil's central bank policymakers raised interest rates by 100 basis points to 13.25% last month and indicated a potential matching increase in March.
In the interview, Haddad likened the elevated borrowing costs to a necessary treatment, cautioning that they should be administered in a manner that does not harm the economy: "at a dose that does not kill the patient."
President Luiz Inácio Lula da Silva has long been critical of what he perceives as excessively high interest rates in the country.