The financial market slightly increased its inflation projection for this year. This Monday’s edition of the Focus Bulletin (13) projects an index, measured by the Broad National Consumer Price Index (IPCA), at 5%, compared to last week’s 4.99%. Four weeks ago the projection was 4.6% for 2025.
The Focus survey is carried out by financial market economists and released weekly by the Central Bank (BC). For 2026, the bulletin also projects a slight increase in inflation to 4.05, compared to 4.03 the previous week.
Last year, the IPCA, which takes into account the variation in the cost of living of families with an income of up to 40 minimum wages, closed at 4.83%, above the target ceiling set at 4.5%.
Since 1999, when Brazil started to adopt the inflation targeting regime, the IPCA, considered the country’s official inflation, exceeded the maximum target limit eight times. The last record was last year, according to data released last Friday (10) by the Brazilian Institute of Geography and Statistics (IBGE).
For 2027, the financial market projection is inflation of 3.9% and for 2028, 3.56%.
In relation to the Gross Domestic Product (GDP) – the sum of goods and services produced in the country – the bulletin maintained last week’s growth projection for 2025. According to the financial market, GDP next year should be 2.02%. For 2026, the projection is growth of 1.8%. For 2027 and 2028, the GDP expansion projection is 2% for both years.
Interest rate
Regarding the basic interest rate, the Selic, the Focus Bulletin maintained last week’s projection of 15%, for 2025. Four weeks ago the projection was 14%. For 2026, the financial market estimate is that the Selic will remain at 12%. For 2026 and 2027, the projections are that the rate will be 10.25% and 10%, respectively.
To achieve the inflation target, the Central Bank uses as its main instrument the basic interest rate, the Selic, set at 12.25% per year by the Monetary Policy Committee (Copom).
At the end of last year, the board increased the Selic by 1 percentage point (pp), with the justification that the financial market’s reaction to the federal government’s fiscal package made the inflationary scenario more adverse, demanding an “even more contractionary” policy. .
The financial market’s negative reactions to the spending cut package, announced by the government in November last year, caused the dollar jumped, surpassing the R$6 level for the first time in history.
Still according to the Copom, the most adverse scenario for the convergence of inflation to the target for 2025, of 3%, with a tolerance range of 1.5% to 4.5% may require new increases in 1 percentage point at Selic in the next two committee meetings: in January, on the 28th and 29th, and in March, on the 18th and 19th.
When the Copom increases the basic interest rate, 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.
But, in addition to the Selic, banks 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
In relation to the exchange rate, the forecast for the dollar’s exchange rate was R$6.00 for 2025. At the end of 2026, the forecast is that the North American currency will also be at R$5.40. For 2026, the exchange rate should also remain, according to the Focus Bulletin, at R$6.00, an increase compared to the R$5.90 projected last week. For 2027, the projection is R$5.82 for the dollar and R$5.88 for 2028.
