The financial market raised its 2026 forecast for Brazil’s official inflation from 4.92 percent to 5.04 percent. The estimate was published this Monday (May 25) in the weekly Focus bulletin by the Central Bank, which details the expectations of financial institutions for the main economic indicators.

The war in the Middle East and the resulting pressure on fuel prices and inflation led to an increase in the estimate for the 11th consecutive week. The 5.04 percent forecast is above the Central Bank’s target range of 3 percent, which has a tolerance margin of 1.5 percentage points.

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In April, food prices pressured official inflation, which reached 0.67 percent. According to the Brazilian government’s statistics agency IBGE, the 12-month accumulated index stood at 4.39 percent, still within the target range.

The inflation projection for 2027 edged up from 4 percent to 4.01 percent. For 2028 and 2029, the estimates are 3.65 percent and 3.5 percent, respectively.

Selic Rate

To achieve the inflation target, the Central Bank uses the basic interest rate (Selic) as its main instrument, which is currently set at 14.5 percent per year by the Monetary Policy Committee. At its last meeting in April, the committee reduced the Selic rate by 0.25 percentage points for the second time in a row, despite tensions surrounding the war.

In the document, the Central Bank stated that it is monitoring the conflict and the inflationary effects of a potential prolonged crisis. The Committee’s next meeting to set the Selic rate will take place on June 16 and 17.

GDP

Financial institutions’ estimate for Gross Domestic Product (GDP) growth this year rose from 1.85 percent to 1.89 percent. For 2027, the projection fell from 1.77 percent to 1.70 percent. For 2028 and 2029, the financial market expects GDP growth of 2 percent per year.

In 2025, the Brazilian economy grew by 2.3 percent, according to IBGE. Driven by expansion across all sectors, with agriculture as a key highlight, this result marks the fifth consecutive year of growth.