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Inflation worsened again in market projections, reaching 4.89% for 2026 in the Focus report released this Monday, May 4, and reignited the understanding that the Central Bank will still have to conduct the next steps with caution, even after cutting the Selic rate to 14.5% last week.
Inflation for 2026 was raised for the eighth consecutive week in the Focus Report released by the Central Bank this Monday, May 4. The estimate for the IPCA rose from 4.86% to 4.89%, above the continuous target ceiling of 4.5%, while the projection for 2027 remained at 4% and that for 2028 advanced to 3.64%.
According to the CNN Brasil portal, what makes this movement weigh more than a punctual revision is the timing. The rise in expectations came just days after Copom cut the Selic rate by 0.25 percentage point, to 14.5% per year, and reaffirmed that it will continue to conduct monetary policy with serenity and caution, amid external uncertainty and the pressure that fuels and food continue to exert on prices.
The strongest detail is the fact that inflation is rising again even with interest rates still very high
The data that draws the most attention is the persistence of the upward revision. The market not only raised inflation for 2026 for the eighth consecutive time, but also kept the projected index above the upper limit of the target pursued by the Central Bank. This keeps alive the perception that inflationary relief has not yet consolidated at the speed that the market and the BC would like.
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Even with the Selic rate still at 14.5% per year, a level that remains quite restrictive, the dominant reading is that recent shocks continue to hinder price convergence. The monetary authority itself raised its inflation projection for this year to 4.6% in last week’s decision, while 12-month inflation came from 4.37% in the most recent reading highlighted by Reuters.
The curious turn is that the Central Bank cut interest rates, but the market became more suspicious
At first glance, the Selic cut might suggest a more comfortable environment. But what happened was almost the opposite. Copom reduced the basic rate for the second consecutive meeting, but made it clear that the next steps will depend on new information, including the depth and duration of tensions in the Middle East and their effects on the Brazilian economy.
In practice, the decision showed that the BC opened space to continue reducing interest rates, but without offering any sign of acceleration. This helps explain why the projected rise in inflation gained so much weight: interest rates began to fall, but the official discourse remains tough enough to remind that the process is still far from being smooth.
The broader context shows that it’s not just inflation that worries
In this Monday’s Focus report, the market maintained the expectation that the Selic rate will end 2026 at 13% per year. For 2027 and 2028, projections remained at 11% and 10%, respectively. At the same time, the GDP growth forecast for 2026 remained at 1.85%, while that for 2027 fell to 1.75%, a sign that the scenario still combines moderate activity with persistent pressure on prices.
The exchange rate also remained practically stable in the estimates, with the dollar projected at R$ 5.25 at the end of 2026, which shows that the worsening of inflation is not being read only as a reflection of a weaker currency. The market seems to envision a more complex picture, in which external factors and sensitive items in the consumption basket continue to make the price trajectory less comfortable.
Why this could change the reading on interest rates and prices in the coming months
The new round of revision reinforces an important message: the Central Bank may continue cutting interest rates, but it should do so at a slow pace and under constant vigilance. With inflation projected at 4.89% for 2026 and above the upper band of the target, any attempt at faster relaxation would face greater resistance inside and outside the market.
This changes the reading because it shifts the focus from the size of the last cut to the difficulty of making inflation converge in a sustained manner. In other words, it’s not enough for the Selic rate to be falling. What really matters now is whether prices will decelerate convincingly or if they will continue to impose a cautious stance on the Central Bank for longer.
What still needs to be confirmed to know if inflation will continue to pressure
Upcoming price data and the evolution of the external scenario should set the tone for the next Copom meetings. The Central Bank has already indicated that it will closely monitor geopolitical developments and their impacts on fuels, food, and expectations, precisely the points that could contaminate the dynamics of inflation going forward.
It will also be crucial to observe whether market projections stabilize in the coming weeks or if the sequence of increases continues. If Focus continues to worsen, the perception that interest rates will remain high for longer tends to gain strength, even in a cycle where the Selic rate has already started to fall.
Ultimately, Monday’s snapshot is clear: inflation expectations rose again, reaching 4.89% for 2026, placing the Central Bank before a delicate balance. The interest rate cut happened, but the message that remained is that the path to more controlled prices still seems narrow, slow, and subject to new jolts.
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