• Inflation projections based on private forecasts before rate hike
• Policymakers say they would not rule out rate increases
• Central bank stresses commitment to inflation target

BRASILIA, June 26 (Reuters) - Brazil's central bank on Thursday said it was confident in its strategy to hold interest rates steady even as its updated projections showed it would not meet its 3% inflation target through 2027.

Speaking at a press conference, Governor Gabriel Galipolo said the bank remains fully committed to the inflation goal. Last week it raised its benchmark interest rate by 25 basis points to 15%, a near two-decade high, and signaled a "very prolonged pause" at that level.

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The central bank's quarterly monetary policy report on Thursday projected annual inflation at 3.2% by the end of 2027, above the 3% target, which has a tolerance band of 1.5 percentage points in either direction.

For the fourth quarter of 2026, the reference period for current policy decisions, annual inflation was forecast at 3.6%.

Asked about inflation projections showing the target would not be reached even in 10 quarters, Galipolo said the central bank's inflation forecast took into account private economists' median estimate of interest rates in the weekly Focus survey.

However, he emphasized that this does not necessarily represent the path the bank will follow.

"There are several paths to reach the center of the target," he said. "We are absolutely committed to it."

Economic policy Director Diogo Guillen stressed the central bank was not extending the timeline for meeting its inflation target. He did not specify what the timeline is.

The bank's latest inflation projections were based on Focus survey estimates that assumed interest rates would have remained at 14.25% last week - a more dovish scenario than reality - until January 2026. Economists projected seven rate cuts next year, with the benchmark rate ending 2026 at 12.5%.

Galipolo said he could not say how long rates would remain at the current 15% level, adding the central bank would stick to its data-dependent approach, a strategy he said "has paid off."

He did not elaborate on how the most recent rate hike could affect the bank's inflation projections.

In their policy statement, policymakers emphasized they would not hesitate to resume rate hikes if needed.

Galipolo said the monetary authority would assess a broad set of indicators, rather than any single metric, when evaluating potential rate increases.

He added that this week's foreign-exchange interventions addressed an issue with foreign-exchange coupons and did not signal any change in the bank's currency policy.

https://www.reuters.com/world/americas/brazil-central-bank-stands-by-inflation-target-despite-forecast-gap-2025-06-26/