Brazilian inflation expectations continued to ease, with analysts marking the twelfth straight week of downward revisions in the Central Bank’s Focus Report released Monday (August 18).
The benchmark consumer price index (IPCA) forecast for 2025 was cut to 4.95% from 5.05%.
Projections for 2026 also edged lower, slipping to 4.40% from 4.41%, while forecasts for 2027 and 2028 were maintained at 4.00% and 3.80%, respectively.
Despite the improved inflation outlook, expectations for the Selic base interest rate this year remained steady at 15% for the eighth consecutive week, suggesting no shift in monetary policy projections in the near term.
The IGP-M, another key inflation index widely used for contracts and rent adjustments, also saw revisions.
The 2025 estimate dropped to 1.13% from 1.28%, while the 2026 projection was lowered to 4.32% from 4.40%.
Forecasts for 2027 and 2028 held at 4.00% and 3.96%.
Regulated price expectations within the IPCA showed mixed moves.
The 2025 projection ticked up to 4.72% from 4.71% and the 2026 forecast rose slightly to 4.18% from 4.17%.
For 2027, estimates stayed unchanged at 4.00%, while the 2028 outlook slipped marginally to 3.71% from 3.72%.
July’s inflation slowed more than expected
Brazilian consumer inflation came in softer than expected in July, as easing food prices continued to provide relief for households, according to data from the statistics agency IBGE.
The IPCA, the country’s benchmark inflation index, rose 0.26% in July, slightly above June’s 0.24% increase but below the 0.37% advance forecast by economists.
The moderation reflected a second consecutive monthly decline in food and beverage prices, which offset gains in other categories.
Housing costs were the largest contributor to the monthly rise, driven by higher electricity tariffs.
Meanwhile, declines in apparel and communication prices helped keep the headline figure below expectations.
GDP forecasts maintain a modest growth path
Brazil’s GDP growth outlook remained broadly steady in the latest projections, underscoring persistent caution about the country’s economic trajectory despite easing inflation expectations.
The forecast for 2025 held at 2.21%, signalling continued anticipation of moderate growth next year.
For 2026, the estimate was unchanged at 1.87%, while the 2027 projection edged lower to 1.87% from 1.93%.
The 2028 forecast was kept at 2.00%, where it has stood for 75 consecutive weeks.
The stagnant outlook highlights scepticism among investors and analysts that improved inflation dynamics will translate into a meaningful acceleration in Brazil’s medium-term economic performance.
Selic rate outlook signals gradual easing ahead
Brazil’s interest rate outlook points to a gradual path of monetary easing, with projections suggesting a slow normalisation process despite currently tight policy settings.
The benchmark Selic rate forecast for 2025 was unchanged at 15.00%, though investors continue to expect cuts to begin from that level.
For 2026, the projection stood at 12.50%, while the 2027 estimate remained at 10.50%.
The longer-term view for 2028 was held at 10.00%, a figure that has now been steady for 34 weeks.
The forecasts indicate that policymakers are expected to maintain a cautious stance, with rate reductions proceeding slowly as inflation expectations improve, but economic growth prospects remain subdued.
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