Key Points
— Brazil’s weekly Focus survey raised the 2026 year-end inflation forecast to 4.31% from 4.17% — the second consecutive large upward revision — with 2027 and 2028 estimates also climbing to 3.84% and 3.57%, all above the 3% target
— The Iran war is the primary driver: Brent crude above $110 is pushing fuel, transport, and fertilizer costs higher, and mid-March consumer prices rose 0.44% month-on-month, far exceeding the 0.29% consensus
— The rising forecasts complicate the Copom’s nascent easing cycle — the central bank cut the Selic by just 25bp to 14.75% on March 18, less than the 50bp markets expected, and has given no guidance on whether further cuts will follow
The Brazil inflation forecast has risen for every year through 2028, according to the central bank’s weekly Focus survey published Monday, as the Iran war drives global fuel prices higher and forces economists to rethink the trajectory of monetary easing. The Rio Times, the Latin American financial news outlet, reports that the 2026 year-end estimate jumped to 4.31% from 4.17% — continuing an acceleration that has taken the forecast from 3.97% in early February to well above the 3% target in just seven weeks.
Forecasts for 2027 rose to 3.84% and for 2028 to 3.57% — meaning market economists no longer expect inflation to return to target within the central bank’s three-year planning horizon. The signal is clear: the Iran conflict’s energy shock is not being priced as temporary.
The Iran Effect on Brazil Inflation Forecast
With Brent crude above $110 per barrel and the Strait of Hormuz effectively closed since early March, the pass-through into Brazilian consumer prices has been swift. Mid-March IPCA data showed a 0.44% monthly increase — blowing past Bloomberg’s 0.29% consensus and raising the trailing 12-month rate to 3.9%. Petrobras has already raised refinery diesel prices by R$0.38 per liter, and further gasoline adjustments are likely if oil remains elevated.
The transmission channels extend beyond fuel. Higher oil prices feed into fertilizer costs — critical for an agricultural economy — transportation, and industrial inputs. The Copom flagged “geopolitical repercussions and the overall impact of the war with Iran on prices” in its March statement, an unusually direct reference to a single external event.
The Easing Cycle at Risk
Central bank president Gabriel Galípolo delivered a cautious 25-basis-point cut to 14.75% on March 18 — half the 50bp reduction markets had expected — and provided no forward guidance on what comes next. Goldman Sachs has pushed its first meaningful cut expectation from June to September, while the Focus survey now shows year-end Selic expectations drifting upward.
The dilemma is acute. Brazil’s economy grew just 0.1% quarter-on-quarter in Q4 2025, and the Focus survey projects only 1.83% growth for 2026 — well below the government’s 2.3% target. Holding rates at nearly 15% risks deepening the slowdown, but cutting faster while inflation expectations are rising in every direction risks the credibility that Galípolo spent his first year building.
For investors, the Focus data delivers a blunt message: Brazil’s inflation problem is no longer just domestic. The war premium in global energy markets has embedded itself in the country’s price expectations, and until the Hormuz crisis resolves, the path back to the 3% target keeps getting longer.