Brazil economists trim 2026 inflation forecast for first time in over two months

Private economists who are surveyed every week by Brazil's central bank slashed their 2026 inflation projection for the first time in over two months, in what may be a positive sign for monetary authorities.

Inflation expectations for consumer prices in 2026 are for a 4.45% rise, down from 4.50% in the prior nine weeks, according to the central bank's Focus panel survey published Monday.

Although slight, the lower revision signals a departure from the pattern of persistent predictions beyond the central bank's 3% inflation target, which has a tolerance zone of 1.5 percentage points in either direction.

The updated prediction takes the 2026 inflation outlook closer to the upper end of the central bank's goal range, potentially indicating that expectations have stabilised following months of uncertainty.

The forecasts for 2027 and 2028 show stability

While the attention has been on 2026, predictions for subsequent years indicate a continuation of mild inflation.

According to the study, analysts held their 2027 inflation prediction stable at 4%, but the 2028 forecast fell slightly to 3.80% from 3.81%.

Though still above the 3% objective, these statistics indicate a gradual convergence toward the central bank's planned course in the long run.

The stability in medium to long-term estimates may serve to alleviate concerns among monetary policymakers, who have recently warned that inflation expectations may be straying away from the target.

These fears persist despite Brazil's current benchmark interest rate of 15%, which is deemed restrictive.

Short-term inflation continues to ease

Inflation projections for 2025 continued their recent downward trajectory, with the IPCA consumer price index now expected to rise 5.10%, down from 5.17% last week.

This steady decline has been attributed in part to a stronger Brazilian real, which has helped reduce import-related price pressures.

In a letter earlier this month, central bank president Gabriel Galipolo stated that inflation is expected to fall within the target tolerance band by the end of the first quarter of 2026.

The latest survey results offer some support to that outlook, although current forecasts remain above the central bank’s ideal midpoint.

No changes in interest rate or GDP projections

In this week's survey, economists' interest rate estimates remained unchanged.

The benchmark Selic rate is still forecast to be 15% in 2025, falling to 12.5% by the end of 2026.

GDP growth is also expected to stay stable, with growth of 2.23% in 2025 and 1.88% in 2026, essentially unchanged from the previous week.

The Brazilian real is expected to trade at 5.65 to the US dollar by the end of 2025 and 5.70 by the end of 2026, unchanged from last week's projections.

Policy implications

The minor movement in inflation estimates for 2026 may be interpreted as an early sign that trust in monetary policy is maintained, notwithstanding broader concerns about fiscal management and political risk.

Nonetheless, with inflation estimates for all anticipated years exceeding the 3% objective, the central bank is expected to maintain its cautious posture.

Any future monetary easing will most likely be determined not only by realised inflation, but also by the continuation of reduced expectations.

Policymakers will be monitoring for more evidence of anchoring in the coming weeks, especially as Brazil deals with both foreign instability and local policy problems.