The financial market forecast for the Broad National Consumer Price Index (IPCA) – considered the country’s official inflation – went from 4.45% to 4.43% this year. The estimate was published in Focus bulletin this Monday (1st)released weekly by the Central Bank (BC), with the expectations of financial institutions for the main economic indicators.
For 2026, the inflation projection varied from 4.18% to 4.17%. For 2027 and 2028, forecasts are 3.8% and 3.5%, respectively.
For the third week in a row, the forecast was reduced, following the release of the results of the October inflationthe lowest for the month in almost 30 years. As a result, the estimate reached the inflation target range that should be pursued by the BC.
Defined by the National Monetary Council (CMN), the target 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 reduction in the electricity bill pulled official inflation down and caused the IPCA to close October at 0.09%, the lowest for the month since 1998according to the Brazilian Institute of Geography and Statistics (IBGE). In September, the index had marked 0.48%. In October 2024, the variation had been 0.56%.
With this result, inflation accumulated in 12 months is 4.68%, the first time in eight months that the level is below 5%. However, still above the CMN target ceiling.
Basic interest
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 Selic for third time in a rowat the last meeting, last month.
However, the board 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 target, despite the slowdown in economic activity, which indicates that interest rates will remain high for a long time.
Market analysts estimate that the base rate will end 2025 at 15% per year. By the end of 2026, the expectation is that the Selic rate will fall to 12% per year. For 2027 and 2028, the forecast is that it will be reduced again to 10.5% per year and 9.5% per year, respectively.
When Copom increases the Selic, the purpose is to contain heated demand; This has an impact on prices because higher interest rates make credit more expensive and encourage savings. Therefore, higher rates can also make it difficult for the economy to expand. Banks also consider other factors when defining the interest charged to consumers, such as risk of default, profit and administrative expenses.
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.
