MercoPress. South Atlantic News Agency

Brazilian Central Bank report foresees 5.08% inflation for this year

The Brazilian real is expected to grow against the US dollar in the coming years, the Focus Bulletin said

The Focus Bulletin released earlier this week by Brazil's Central Bank (BCB) projected a 5.08% inflation for this year in South America's largest country. The new prediction represented a slight twitch from last week's 5% National Consumer Price Index (IPCA). Meanwhile, Brazil's Gross Domestic Product (GDP) - the sum of goods and services produced in the country - is expected to grow by 2.04% in 2025, a slight improvement from 2.02% the week before.

The Focus survey is carried out with financial market economists and published weekly by the Central Bank. For 2026, the bulletin shows a GDP growth projection of 1.77%. For 2027 and 2028, the economy is expected to expand by 2% each year.

Regarding inflation, the bulletin projects a rate of 4.10% for 2026, compared to 4.05% last week. For 2027, the financial market is projecting an IPCA of 3.9% and 3.58% in 2028.

The IPCA, which takes into account the variation in the cost of living for families with an income of up to 40 minimum wages, closed last year at 4.83%, above the target ceiling of 4.5%.

Meanwhile, the basic Selic interest rate kept last week's forecast of 15% for 2025. Four weeks ago the projection was 14.75%. In 2026, the financial markets foresee the Selic at 12.25%, a slight increase from last week's 12%. For 2027 and 2028, the projections are for the rate to be 10.25% and 10%, respectively.

In a move to achieve the inflation target, the BCB's main instrument is the Selic, currently set at 12.25% by the Monetary Policy Committee (Copom), which upped it by one percentage point last year to counter the financial market's reaction to the federal government's fiscal package which worsened the inflationary scenario, thus calling for an “even more contractionary” policy.

Also according to the Copom, the more adverse scenario for convergence of inflation to the 2025 target of 3%, with a tolerance range of 1.5% to 4.5%, may require further increases of 1 percentage point in the Selic rate at the next two meetings of the committee: scheduled for Jan. 28 and 29, and March 18 and 19.

Regarding the Brazilian real's exchange rate against the US dollar, it was forecast at R$ 6.00 for 2025 and 2026, while for 2027 it should go down to R$ 5.92, Focus said. In 2028, the projection was R$ 5.99.

(Source: Agencia Brasil)