Brazil economists trim long-term inflation forecast, ending six-month plateau

BRASILIA, Aug 25 (Reuters) - Brazilian private economists polled weekly by the central bank lowered their forecast for 2027 inflation, breaking a six-month stretch of stability in a move likely to be welcomed by policymakers uneasy about projections drifting away from target.

The median projection for 2027 inflation fell to 3.97% from 4.00% the previous week, marking its first change in 26 consecutive weeks after previously trending higher. Brazil's official inflation target is 3%, with a tolerance band of 1.5 percentage points either side.

The central bank interrupted an aggressive tightening cycle in late July, keeping its benchmark Selic rate steady at a near 20-year high of 15% after 450 basis points of hikes since September last year.

In the minutes of that decision, policymakers stressed that long-term inflation expectations had shown little variation between rate-setting meetings, even as break-even rates derived from financial assets declined.

They underscored their commitment to re-anchoring expectations and pursuing monetary policy consistent with that goal.

All members of the bank's monetary policy committee had long flagged discomfort with unanchored inflation expectations, warning that such a drift "increases the disinflation cost in terms of activity."

In the poll, economists left their 2028 inflation forecast unchanged at 3.8%.

Shorter-term projections had already been falling in recent weeks, helped by currency appreciation this year amid global dollar weakness and more recently by clearer signs of economic slowdown in Latin America's largest economy.

For 2025, economists cut their median forecast to 4.86% from 4.95%, while expectations for next year eased to 4.33% from 4.40%.