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The financial market has adjusted its forecast for the National Broad Consumer Price Index (IPCA), Brazil’s official inflation gauge, from 4.72% to 4.70% for this year. This outlook was published in the Focus Report released by the Central Bank on Monday (20th), which compiles weekly forecasts from financial institutions on the country’s main economic indicators.
For 2026, inflation expectations also dropped—from 4.28% to 4.27%. Projections for 2027 and 2028 are 3.83% and 3.6%, respectively.
It’s worth noting that the current inflation estimate for 2024 is above the target set by the Central Bank. As determined by the National Monetary Council, the inflation target is 3%, with a tolerance range of 1.5 percentage points above or below—placing the upper limit at 4.5%.
Basic Interest Rates
To keep inflation in check, the Central Bank uses the Selic rate as its main tool, which is currently set at 15% per year by the Monetary Policy Committee (Copom). External economic uncertainties and indicators pointing to a slowdown in domestic growth contributed to the Copom’s decision last month to maintain the Selic at its current level.
According to meeting minutes, the committee intends to keep the interest rate at “a relatively high level for a long period” to ensure inflation reaches its target.
Analysts expect the Selic to finish 2025 at the current 15% per year. By the end of 2026, the forecast is for the rate to drop to 12.25% annually. For 2027 and 2028, further reductions are expected—to 10.5% and 10% per year, respectively.
Raising the Selic is meant to cool demand, which tends to ease price pressures by making loans more expensive and encouraging savings. However, banks also consider other variables—such as credit risk, profit, and administrative costs—when setting consumer interest rates.
Higher base rates can make economic expansion more difficult. When the Selic drops, credit becomes more affordable, which can boost production and consumption, possibly reducing inflation control and stimulating economic activity.
GDP and Exchange Rate
In this edition of the Focus Report, financial institutions raised their forecast for Brazil’s economic growth this year slightly, from 2.16% to 2.17%. For 2026, GDP growth is expected to be 1.8%. Estimates for 2027 and 2028 are for growth of 1.82% and 2%, respectively.
Driven by expansions in the services and industrial sectors, Brazil’s economy grew by 0.4% in the second quarter of this year. In 2024, GDP closed with an increase of 3.4%. This marks the fourth consecutive year of growth, making it the strongest expansion since 2021, when GDP grew by 4.8%.
The dollar is expected to be priced at R$5.45 at the end of this year, rising to R$5.50 by the end of 2026, according to current market forecasts.
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