For the second week in a row, the projection for 2025 inflation in Brazil is below the target ceiling. This is what the Focus bulletin, released this Monday (24), shows, with financial market forecasts indicating that the year will close with the Broad National Consumer Price Index (IPCA), the country’s official inflation, at 4.45%.
In relation to the Gross Domestic Product (GDP, the sum of all wealth produced in the country), the market maintained the projections recorded in previous weeks, of growth of 2.16% in 2025; 1.78% in 2026; and 1.88% in 2027.
Inflation
Defined by the National Monetary Council (CMN), the target for inflation is 3%, with a tolerance range of 1.5 percentage points up or down. In other words, the lower limit is 1.5% and the upper limit is 4.5%.
The improvement in the forecast came after the October inflation result (0.09%), announced by the Brazilian Institute of Geography and Statistics (IBGE), was the lowest for the month since 1998. As a result, inflation accumulated in 12 months, ending in October, was 4.68%.
It was, therefore, the first time in eight months that the level presented was below 5%.
The Focus Bulletin revision for the 2025 IPCA was at 4.56% four weeks ago; and at 4.46% last week. For subsequent years, inflationary projections presented by the market are 4.18%, in 2026; and 3.80% for 2027.
Selic
To achieve the inflation target, the Central Bank uses as its main instrument the basic interest rate – the Selic – set at 15% per year by the BC’s Monetary Policy Committee (Copom). The decline in inflation and the slowdown in the economy led to the maintenance of the Selic rate for the third time in a row, at the last meeting, at the beginning of this month.
However, the Copom does not rule out the possibility of raising interest rates again “if it deems it appropriate”.
In a note, the BC reported that the external environment remains uncertain due to the situation and economic policy in the United States, with repercussions on global financial conditions.
In Brazil, the authority highlighted that inflation remains above the center of the target (3%), despite the slowdown in economic activity, which indicates that interest rates will remain high for a long time.
Market analysts’ estimate, 22 weeks ago, was that the Selic would end 2025 at 15% per year. However, the projections for 2026 were revised downwards, going from 12.25% projected in previous weeks, to 12% in this edition of the bulletin. For 2027, projections are stable, at 10.50%.
When Copom increases the Selic, the purpose is to contain heated demand; and this has an impact on prices because higher interest rates make credit more expensive and encourage savings.
Banks also consider other factors when defining the interest charged to consumers, such as risk of default, profit and administrative expenses. Therefore, higher rates can also make it difficult for the economy to expand.
When the Selic rate is reduced, the tendency is for credit to become cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
Exchange
Regarding the exchange rate, financial market projections remained stable, indicating that the dollar will close the year at R$5.40. The market also maintained the same projections released in previous weeks for the North American currency, both for 2026 and 2027: R$5.50.
