Brazil Inflation Forecast for 2026 Drops for Third Consecutive Week

Financial market analysts in Brazil have lowered their inflation forecast for 2026 for the third consecutive week, now projecting it at 5.15%. This projection is part of the "Boletim Focus," released by the Central Bank (BC) based on surveys of over 100 financial institutions. The reduction in the inflation outlook occurred despite the resurgence of conflict in the Middle East, which has driven up oil prices and could potentially increase domestic fuel costs, thereby impacting Brazilian inflation. For 2027, the inflation expectation remained stable at 4.20%, while the forecast for 2028 saw a slight increase from 3.70% to 3.78%, and the estimate for 2029 stayed at 3.50%. Since the beginning of 2025, Brazil aims to maintain inflation at 3% under a continuous target system, with a tolerance band of 1.50% to 4.50%. Higher inflation erodes purchasing power, particularly for lower-income individuals, as prices rise faster than wages. Despite an increased inflation projection for 2028, the market anticipates further reductions in the Selic interest rate, currently at 14.25% annually, with three cuts already implemented this year. The market expects the Selic rate to end 2026 at 14% and 2027 at 12%, with the 2028 forecast at 10.50%. The economic activity forecast for 2026 remains at 1.99% GDP growth, compared to the official 2.3% growth in the previous year. The GDP growth projection for 2027 is unchanged at 1.65%. The exchange rate forecast for the end of this year is R$5.20 per dollar, and for the end of 2027, it is R$5.28 per dollar.