The financial market revised inflation expectations downwards for the year 2026. According to the Focus Bulletin, released this Monday (12) by the Central Bank (BC), the year will close with the Broad Consumer Price Index (IPCA) at 4.05%. 
Last week, this index, which serves as a reference for the country’s official inflation, was at 4.06%. And four weeks ago at 4.10%.
For subsequent years (2027 and 2028) the projections are the same as ten weeks ago, at 3.80% and 3.50%, respectively.
Inflation target
Defined by the National Monetary Council (CMN), the inflation target for 2025 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%.
According to the Brazilian Institute of Geography and Statistics (IBGE), inflation measured in December increased by 0.33%, compared to 0.18% recorded in the previous month. As a result, the 2025 IPCA was 4.26%, within the government’s target.
According to IBGE, with the exception of the housing group, which registered a drop of 0.33%, the other groups of products and services surveyed increased in December.
The biggest change (0.74%) and the biggest impact (0.15 pp) came from transport, followed, in terms of impact, by health and personal care, with an increase of 0.52% and 0.07 pp
GDP
The other indices in the Focus Bulletin released today remained stable in relation to previous weeks.
In the case of the Gross Domestic Product (GDP, the sum of all goods and services produced in Brazil), the market projects that the country’s economy will grow 1.80% in 2026 – a percentage that has been projected for five consecutive weeks, and the same projected for 2027.
For 2028, expectations are that GDP will close the year with growth of 2%.
Exchange
Regarding the exchange rate, market projections have remained stable for 13 consecutive weeks, with an expectation that the dollar will close 2026 quoted at R$5.50 – the same value projected for 2027.
For 2028, expectations are that the US currency will end the year quoted at R$5.52.
Selic
The basic interest rate (Selic) is expected to be reduced from the current 15% to 12.25% by the end of 2026, according to the financial market; and to 10.50% in 2027. For the subsequent year (2028), expectations are that it will fall even further, to 9.88%.
The Selic is currently at its highest level since July 2006, when it registered 15.25% per year. After reaching 10.5% per year in May last year, the rate began to be increased in September 2024.
The Selic reached 15% per year at the June meeting, and has been maintained at that level since then.
Selic variations
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.
