Key Points
— The median 2026 IPCA forecast rose from 4.31% to 4.36%, the fourth consecutive weekly increase, driven by energy cost pass-throughs from the Strait of Hormuz closure — but still within the 4.5% upper band of the central bank’s target
— The Selic year-end forecast held steady at 12.5%, implying roughly 225 basis points of additional cuts from the current 14.75% level — but the Banco Central has signaled it may pause or slow the easing cycle if the Middle East conflict persists
— GDP growth for 2026 held at 1.85%, the dollar forecast eased to R$5.40, and the March IPCA print — the first to fully capture the war’s impact on prices — will be released Thursday
The trajectory tells the story. Four weeks ago, analysts expected 2026 inflation below 4.2%. Now the forecast is approaching the ceiling of the central bank’s target range — and the number that arrives Thursday could push it closer still.
Monday’s Brazil Focus report, published by the Banco Central do Brasil, showed financial institutions raising their year-end IPCA inflation forecast from 4.31% to 4.36% — the fourth consecutive weekly increase. The steady upward drift reflects the pass-through of the Strait of Hormuz energy shock into Brazilian consumer prices, particularly through transportation and fuel costs. The 12-month trailing IPCA stood at 3.81% through February, below 4% for the first time since May 2024, but the March reading due Thursday is expected to show the first material impact of the war on domestic prices.
The Selic Path: Easing Under Pressure
The Copom cut the Selic by 25 basis points to 14.75% at its last meeting — a more cautious move than the 50bp cut that had been the pre-war consensus. Before the Iran conflict escalated, markets had expected an aggressive easing cycle. Now the Banco Central has explicitly warned it may pause or reverse course if inflationary pressures intensify.
The year-end Selic forecast in this week’s Brazil Focus report held at 12.5%, implying roughly 225bp of further cuts from the current level across the remaining Copom meetings this year. For 2027, analysts expect 10.5%, and for 2028, 10%. The next Copom meeting is scheduled for April 28–29 — by which point the March IPCA data, the Iran ceasefire deadline outcome, and any Brent price adjustment will all be on the table. At 14.75%, the Selic remains at its highest level since July 2006, when it stood at 15.25%. The rate was raised seven consecutive times between September 2024 and June 2025 before the tightening cycle paused.
Growth and Currency
GDP growth expectations for 2026 held flat at 1.85%, unchanged for several weeks. The economy expanded 2.3% in 2025, marking its fifth consecutive year of growth, but the combination of tight monetary policy and global uncertainty is expected to weigh on activity this year. For 2027 and 2028, analysts project 1.8% and 2.0% respectively — a picture of structural deceleration toward potential growth rates.
The dollar forecast for year-end 2026 eased slightly to R$5.40, down from R$5.41 the prior week. For 2027, the market expects R$5.45. The real has benefited from Brazil’s status as a net oil exporter during the Hormuz crisis, as well as from the high carry offered by the Selic — but election-year fiscal uncertainty and the possibility of a renewed hawkish turn from the Fed could test that stability.
What to Watch This Week
Thursday’s March IPCA release by IBGE will be the single most important data point for the Copom’s April decision. If transportation and fuel costs push the monthly reading significantly above February’s 0.7%, the case for pausing the easing cycle strengthens materially. Trump’s Tuesday deadline for Iran adds a binary risk: a ceasefire could send Brent back below $90 and ease the inflation outlook; an escalation could push it toward $120 and force the Banco Central to reconsider its entire rate path. For now, the Focus numbers show a central bank navigating between two fires — inflation creeping toward the ceiling and an economy that, at 1.85% growth, can barely afford more restrictive policy.