Brazil's Inflation Forecast for 2026 Adjusted Slightly Lower Amid Stable Economic Expectations

The Brazilian financial market has revised down its inflation forecast for 2026, estimating the Consumer Price Index (IPCA) at 4.05%, slightly lower than the previous 4.06% and the 4.10% projected four weeks ago. This update was revealed in the Central Bank's Focus Bulletin on January 12, 2026. Inflation projections for 2027 and 2028 remain stable at 3.80% and 3.50%, respectively.

The National Monetary Council has set the official inflation target for 2025 at 3%, allowing a tolerance range of ±1.5 percentage points, meaning the inflation rate should ideally stay between 1.5% and 4.5%. The Brazilian Institute of Geography and Statistics (IBGE) reported a 0.33% inflation increase in December 2025, higher than the previous month's 0.18%, resulting in an annual inflation rate of 4.26%, within the government's target range.

All product and service groups saw price increases in December, except for housing, which declined by 0.33%. Transport prices rose the most at 0.74%, contributing 0.15 percentage points to inflation, followed by health and personal care at 0.52%, contributing 0.07 points. Meanwhile, GDP growth is projected at 1.80% for both 2026 and 2027, with a slight increase to 2% in 2028.

Currency forecasts expect the U.S. dollar to remain steady at R$5.50 through 2027 and slightly rise to R$5.52 in 2028. The Selic rate, Brazil’s basic interest rate, is expected to decrease from the current 15% to 12.25% by the end of 2026, continuing downward to 10.50% in 2027 and 9.88% in 2028. The Central Bank has previously raised the Selic since September 2024 to control demand and inflation, with reductions expected to stimulate credit and consumption in the coming years.