Brazil’s central bank sees a slowdown in economic activity next year as essential for inflation to converge to its 3% target. Acting Economic Policy Director Paulo Picchetti said the output gap (difference between actual and potential economic activity) embedded in the bank’s 2027 forecast is necessary for prices to converge in its models. The bank forecast gross domestic product growth of 1.4% in 2027, below the government’s 2.3% projection. Central bank governor Gabriel Galipolo urged humility in interpreting unusually uncertain data and cautioned against a false sense of precision, including over whether projected annual inflation of 3.1% from the second quarter of 2028 onward represents convergence to the 3% target. He said policymakers would avoid overreacting to individual data points to limit unnecessary volatility, while noting increasingly clear signs of slowing activity. Galipolo also said planned macroprudential measures (rules to limit financial-system risks) aim to curb aggressive lending and address predatory credit, citing 65% credit-card delinquency and calling it evidence of a product design flaw.