Brazil market expects higher inflation, Selic rate for 2026
The Central Bank of Brazil's (BCB) latest Focus Market Readout shows economists expect higher inflation and Selic interest rates for 2026. The median forecast for IPCA inflation rose to 4.91 percent, and the Selic target increased to 13.00 percent.
Inflation and policy rate forecasts rise
Market expectations for Brazil's 2026 IPCA inflation saw a slight upward revision, moving from 4.89 percent a week ago to 4.91 percent today, continuing a weekly upward trend.
The Selic target rate for 2026 also increased significantly over the past month, from 12.50 percent to 13.00 percent, with a consistent upward trend observed over the last three weeks.
For 2027, the Selic target is now forecast at 11.25 percent, up from 11.00 percent a week prior.
Conversely, GDP growth expectations for 2026 remained stable at 1.85 percent, showing no change from the previous week.
The exchange rate forecast for 2026 saw a slight decrease, settling at R$5.20 per US dollar, down from R$5.25.
Longer-term outlook remains stable
While 2026 forecasts showed some adjustments, the outlook for 2028 and 2029 largely maintained stability across key indicators.
IPCA inflation for 2028 and 2029 held steady at 3.64 percent and 3.50 percent, respectively.
Similarly, GDP growth projections for both 2028 and 2029 remained unchanged at 2.00 percent.
The exchange rate for 2028 saw a minor downward revision to R$5.35, while 2029 remained at R$5.40. Other indicators like the IGP-M and Regulated Prices also showed minor fluctuations or stability in the longer term, suggesting a relatively consistent view on the economy beyond the immediate next year.
Subtle shifts, significant implications
The slight upward revisions for 2026 inflation and Selic suggest persistent price pressures and a cautious central bank stance, indicating that disinflation is proving more challenging than anticipated.
This implies continued higher borrowing costs for businesses and consumers, potentially dampening economic activity in the near term.
For policymakers, these shifts underscore the need for vigilance and potentially less room for aggressive monetary easing in the coming year.
Source: BCB - Focus Market Readout - 05/08/2026
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