Brazil central bank to publish only one inflation scenario in future communications

BRASILIA: Brazil's central bank said on Thursday it will in future publish only one central scenario for its inflation forecasts in policy statements and reports, instead of several scenarios currently based on a range of interest and exchange rate variables.

Starting from the statement accompanying the Oct. 28 monetary policy decision, the inflation outlook will be based on the Selic rate forecasts from the bank's most recent 'FOCUS' survey of economists, and the exchange rate path based on purchasing power parity.

The move is part of the bank's effort to improve and make clearer its communication with the public.

"This will be the only scenario to be published in a systematic manner by the central bank," it said in its Quarterly Inflation Report published on Thursday.

"This is usual procedure (with) international central banks and will allow for a deeper focus on the economic analysis of (our) projections, making the document simpler and more effective," it said.

That said, the central bank said it may still publish alternative scenarios that factor in a range of FX and other variables.

Central bank policy statements up to now outline a range of inflation projections out to three years based on a range of FX and interest rate forecasts, while its Quarterly Inflation Reports contain four different scenarios.

The FX input into its forecasts from now on will be based on purchasing power parity, a "real" exchange rate factoring in the difference between domestic and foreign inflation rates, the central bank said.