Focus Report: Brazil’s Inflation Forecast Edges Down to 5.66% After 19-Week Streak

The Central Bank of Brazil’s latest Focus report reveals financial analysts have slightly reduced the 2025 inflation forecast from 5.68% to 5.66%.

This marks a rare downward adjustment after inflation projections rose for 19 consecutive weeks. Analysts maintain a cautious outlook despite this minor improvement.

The 5.66% inflation projection still exceeds the Central Bank’s target ceiling of 4.5% by a significant margin. Brazil operates under a continuous inflation targeting system centered at 3% with a tolerance range of 1.5 percentage points in either direction.

The economic growth forecast received a similar downward revision. Economists now expect Brazil’s GDP to expand by 1.99% in 2025, down from the previous 2.01% projection. The 2026 growth forecast dropped more substantially from 1.70% to 1.60%.

This slowdown follows three years of robust economic performance. Brazil achieved approximately 3% annual growth from 2022 through 2024, driven by strong domestic consumption and agricultural output.

Tighter monetary conditions primarily drive the projected deceleration. The benchmark Selic interest rate remains forecast at 15% for year-end 2025. Economists expect the Central Bank to raise rates from the current 13.25% to 14.25% at its March meeting.

A weaker fiscal impulse and less favorable global economic context also contribute to Brazil’s slowdown. The Brazilian real has shown unexpected strength recently, with the dollar declining about 7.5% against it year-to-date.

Looking beyond 2025, analysts project inflation at 4.48% for 2026 and 4.00% for 2027. The fiscal outlook raises additional concerns. The IMF projects Brazil’s gross government debt will grow from 85% of GDP in 2023 to 95% by 2027.

Brazil now walks a tightrope between controlling inflation and stimulating growth. Policymakers face difficult choices as they navigate these economic challenges in the coming years.

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.