The financial market’s forecast for Brazilian economic growth this year rose from 2.43% to 2.46%. The estimate is in the Focus Bulletin this Monday (2), a survey released weekly by the Central Bank (BC) with the projection for the main economic indicators.
For 2025, the expectation for the Gross Domestic Product (GDP – the sum of goods and services produced in the country) is growth of 1.85%. For 2026 and 2027, the financial market also projects GDP expansion of 2%, for both years.
In 2023, exceeding projections, the Brazilian economy grew 2.9%with a total value of R$10.9 trillion, according to the Brazilian Institute of Geography and Statistics (IBGE). In 2022, the growth rate had been 3%.
The dollar is expected to be worth R$5.33 by the end of this year. At the end of 2025, the US dollar is expected to be worth R$5.30.
Inflation
In this edition of Focus, the forecast for the Broad National Consumer Price Index (IPCA) – considered the country’s official inflation rate – in 2024 rose from 4.25% to 4.26%. For 2025, the inflation projection was 3.92%. For 2026 and 2027, the forecasts are 3.6% and 3.5%, respectively.
The estimate for 2024 is above the inflation target, but still within tolerance, which should be pursued by the Central Bank. Defined by the National Monetary Council (CMN), the target is 3% for this year, with a tolerance range of 1.5 percentage points above or below. In other words, the lower limit is 1.5% and the upper limit is 4.5%.
From 2025, the following will come into force: continuous target systemthus, the CMN no longer needs to set an inflation target each year. The board set the center of the continuous target at 3%, with a tolerance margin of 1.5 percentage points above or below.
In July, driven mainly by the price of gasoline, plane tickets and electricity, the country’s inflation was 0.38%, after having registered 0.21% in June. According to the IBGE, in 12 months, the IPCA accumulated 4.5%, at the upper limit of the inflation target.
August inflation will be released next Monday (9).
Interest rate
To achieve the inflation target, the Central Bank uses as its main instrument: base interest ratethe Selic, set at 10.5% per year by the Monetary Policy Committee (Copom). Faced with an adverse external environment and increasing economic uncertainties, at the last meeting at the end of July, the BC decided to maintain the Selic, for the second time in a row, after a cycle of seven reductions that ran from August 2023 to May 2024.
From March 2021 to August 2022, Copom raised the Selic rate 12 times in a row, in a monetary tightening cycle that began amid rising food, energy and fuel prices. For one year, from August 2022 to August 2023, the rate was maintained at 13.75% per year, for seven consecutive meetings. With price control, the Central Bank began to cut the Selic rate.
Before the start of the upward cycle in March 2021, the Selic rate had been reduced to 2% per year, the lowest level in the historical series that began in 1986. Due to the economic contraction caused by the COVID-19 pandemic, the Central Bank had lowered the rate to stimulate production and consumption. The index was at its lowest level in history from August 2020 to March 2021.
The next Copom meeting is scheduled for September 17 and 18.
For the financial market, the Selic rate should end 2024 at its current level, at 10.5% per year. By the end of 2025, the base rate is expected to fall to 10% per year. For 2026 and 2027, it is expected to be reduced again, to 9.5% per year and 9% per year, respectively.
When Copom increases the basic interest rate, the aim is to curb heated demand, and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. However, in addition to the Selic rate, banks consider other factors when setting the interest rates charged to consumers, such as default risk, profits and administrative expenses. Therefore, higher rates can also hinder economic growth.
The Selic rate tends to make credit cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
