Brazil Focus Survey: Inflation Expectations Ease, But “High-For-Longer” Rates Persist

Key Points

• 2026 inflation expectations edged lower again, staying inside the target band’s ceiling.
• The market still sees high interest rates through 2029, with a small uptick in longer-run projections.
• Growth forecasts stayed modest, and the exchange-rate path remained broadly unchanged.

Yesterday’s Central Bank Focus survey, published Monday, January 19, 2026, showed a small but clear easing in inflation expectations. The median forecast for 2026 IPCA inflation slipped to 4.02%, from 4.05% a week earlier.

Four weeks ago, it stood at 4.06%. That keeps expectations below the top of Brazil’s target tolerance band, which caps at 4.5%. Interest-rate expectations were steady near-term, but less comforting further out.

The median projection for the Selic rate at end-2026 held at 12.25%, even as the current policy rate sits at 15%. The 2027 Selic forecast also stayed at 10.50%.

For 2028, the median moved up to 10.00% from 9.88%, extending a recent upward drift. For 2029, the market kept 9.50%. Growth forecasts did not improve.

Economists kept the 2026 GDP growth median at 1.80%, unchanged for six straight weeks. The 2027 median also remained 1.80%. For 2028 and 2029, the median stayed at 2.00%.

Currency expectations were almost flat. The median year-end dollar forecast stayed at R$5.50 ($1) for both 2026 and 2027. For 2028, it was R$5.52 ($1). For 2029, the median rose to R$5.57 ($1).

Some secondary price gauges also suggested limited pressure. The 2026 IGP-M median was 3.92%. Administered prices were seen rising 3.75% in 2026.

Taken together, the survey reinforces a “slow disinflation, cautious easing” story. The near-term picture supports future cuts. The higher long-run Selic medians signal lingering skepticism about a quick return to low rates.

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