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New estimate exceeds the ceiling of 4.5% and reflects oil pressures, resilient economic activity, and fiscal uncertainties; index should fall to 3.7% in 2027 and 3.1% in 2028, according to current Central Bank projections
Brazilian inflation is expected to close 2026 at 5.2%, according to the new Central Bank projection, above the previously estimated 3.9%. The percentage exceeds the 4.5% ceiling of the target regime, while the probability of non-compliance in the last quarter jumped from 30% to 79%.
Brazilian inflation is expected to exceed the target limit
The permanent inflation target, defined by the National Monetary Council, is 3%, with a tolerance of 1.5 percentage points up or down. Thus, the IPCA should remain between 1.5% and 4.5%.
With the estimate of 5.2%, Brazilian inflation would be 0.7 percentage points above the upper limit. The Central Bank predicts that the accumulated index over four quarters will reach this level at the end of 2026.
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The report also points to a significant worsening in the risk of exceeding the target. The possibility of the IPCA exceeding 4.5% in the last quarter of this year rose from 30% to 79%.
Oil, economic activity, and fiscal scenario pressure prices
The Central Bank attributes the revision to more resilient economic activity than expected, rising commodity prices, especially oil, and fiscal and inflationary uncertainties.
The document adds that new government measures aimed at stimulating demand may affect price behavior during the coming quarters.
If inflation remains outside the tolerance range for six consecutive months, the institution must formally explain the situation to the Ministry of Finance and present the measures planned to bring the index back to the target.
Projection indicates gradual deceleration of inflation from 2027
Although the short-term scenario has become more pressured, the Central Bank projects a gradual reduction in inflation over the following years.
For the fourth quarter of 2027, a period considered relevant for monetary policy, the estimate is 3.7%. The index would still be above the center of the 3% target but within the tolerance range.
According to current projections, inflation should close 2028 at approximately 3.1%, a level close to the permanent objective pursued by the monetary authority.
This article was prepared based on information from the Central Bank’s Monetary Policy Report, with data, numbers, and statements preserved as per the consulted material.
