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BRASILIA, Aug 9 (Reuters) - Brazil's central bank said on Tuesday its inflation forecast for the 12 months to March 2024 is in line with its policy strategy, indicating more strongly that its aggressive monetary policy cycle may have come to an end.
In the minutes from its last policy meeting, policymakers said the 3.5% projection "is consistent with the strategy of inflation convergence to around the target over the relevant horizon."
The central bank began emphasizing its 12-month inflation forecast through March 2024 in its policy statement last week, while acknowledging that its inflation projection for next year had worsened.
The official inflation target is 3.25% in 2023 and 3% in 2024, with current central bank estimates at 4.6% and 2.7%, respectively.
"The Committee decided to emphasize the projections for 12-month inflation in the first quarter of 2024, which reflects the relevant horizon, smoothens out the primary effects from tax changes, but incorporates their second-round effects on the relevant inflation projections for monetary policy decisions," the minutes said.
After 12 interest rate hikes that put the central bank's key policy rate at 13.75%, sharply higher than the record low of 2% in March 2021, the rate-setting committee known as Copom had left the door open for a smaller "residual" rate hike in September, dropping the firm guidance used in prior meetings when further hikes were clearly penciled in.
Policymakers emphasized that they would attempt to bring inflation down to around their target while holding rates at the same level for a longer period, the minutes showed.
"Given the persistence of recent shocks, the Committee will remain vigilant and will assess whether the prospect of maintaining the Selic (base) rate by itself for a sufficiently long period will ensure such a convergence." (Reporting by Marcela Ayres; Editing by Susan Fenton and Paul Simao)