Focus Report: Brazil’s Inflation Persists Despite High Interest Rates

Brazil heads into the second half of 2025 with official inflation running at 5.09%—well above the central bank’s 4.5% upper target.

The country’s Focus Report, which polls hundreds of economists, confirms that prices keep rising, despite nearly two years of higher borrowing costs.

The most recent data from the national statistics agency shows inflation barely moved down from the previous month, and food, transport, and electricity continue to lift the total.

Electricity prices rose after new tariffs took effect, offsetting falling food prices. The inflation challenge remains broad-based, hitting most household expenses.

To combat this persistence, the Central Bank has kept the benchmark interest rate (Selic) at a steep 15%. That’s the highest in nearly two decades.

Money stays expensive, which slows down both borrowing and investment. Businesses report caution in hiring and expanding, while families feel the pinch in loan payments and credit card rates.

Despite these headwinds, Brazil’s economy has not stalled. Analysts still expect the country’s gross domestic product (GDP) to grow 2.2-2.3% this year, as confirmed by the Focus Report and IMF.

Brazil Faces Slower Growth and Inflation Challenges

Government officials estimate a slightly higher figure, but the consensus points to a gentle slowdown compared to last year’s stronger expansion.

Most economists now expect a further growth dip in 2026 as tight financial conditions weigh on consumer spending and private investment.

Brazil’s inflation target recently switched to a continuous model. Instead of checking progress once at year’s end, the central bank now uses a rolling 12-month reference.

If inflation stays outside the target range for six months, officials must explain why and provide a plan. With price pressures stubbornly high for over nine months, that threshold has already triggered formal warnings and public commitments to corrective action.

What matters now is the balance between fighting inflation and supporting jobs and incomes. If high rates succeed in cooling demand, inflation may creep down, but too much policy restraint risks choking off private sector recovery.

For ordinary Brazilians, this story shows up in higher costs for food, transport, and power, as well as pricier credit cards and mortgages.

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