The financial market forecast for the Broad National Consumer Price Index (IPCA) – considered the country’s official inflation – went from 4.39% to 4.5% this year. The estimate is in the Focus Bulletin this Monday (21), a survey released weekly, in Brasília, by the Central Bank (BC) with the expectations of financial institutions for the main economic indicators.
For 2025, the inflation projection also rose from 3.96% to 3.99%. For 2026 and 2027, forecasts are 3.6% and 3.5%, respectively.
The estimate for 2024 is at the ceiling of the inflation target that should be pursued by the BC. Defined by the National Monetary Council (CMN), the target is 3% for this year, 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%.
From 2025the continuous target system will come into force and, thus, the CMN will no longer need to define 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 up or down.
In Septemberdriven mainly by household electricity bills, inflation in the country was 0.44% after the IPCA registered deflation of 0.02% in August. According to IBGE, in 12 months the IPCA accumulates 4.42%.
Basic interest
To achieve the inflation targetthe Central Bank uses the basic interest rate, the Selic, as its main instrument, defined at 10.75% per year by the Monetary Policy Committee (Copom). The recent rise in the dollar and uncertainties surrounding inflation caused the board to raise interest rates for the first time in more than two years.
The last interest rate hike occurred in August 2022, when the rate rose from 13.25% to 13.75% per year. After spending a year at this level, the rate had six cuts of 0.5 points and one cut of 0.25 points, between August last year and May this year. At the June and July meetings, the Copom decided to maintain the rate at 10.5% per year.
The next Copom meeting is scheduled for November 5th and 6th, when analysts expect a new increase in the basic rate. For the financial market, Selic should end 2024 at 11.75% per year.
By the end of 2025, the estimate is that the basic rate will fall to 11.25% per year. For 2026 and 2027, the forecast is that it will be reduced, again, to 9.5% per year and 9% per year, respectively.
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.
GDP and exchange rate
The projection of financial institutions for the growth of the Brazilian economy this year rose from 3.01% to 3.05%. In the second quarter of the year, the Gross Domestic Product (GDP – the sum of goods and services produced in the country) surprised and rose 1.4% compared to the first quarter. According to the Brazilian Institute of Geography and Statistics (IBGE), compared to the second quarter of 2023, the increase was 3.3%.
For 2025, the expectation for the Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – is growth of 1.93%. For 2026 and 2027, the financial market estimates GDP expansion also at 2%, for both years.
In 2023, also exceeding projectionsthe Brazilian economy grew 2.9%, with a total value of R$10.9 trillion, according to IBGE. In 2022, the growth rate had been 3%.
The dollar exchange rate forecast is R$5.42 for the end of this year. At the end of 2025, it is estimated that the North American currency will be R$5.40.
