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Market Lowers Inflation Forecast to 4.85% in 2025. Selic Remains Steady at 15% and Dollar Projected Above R$ 5.50 by Year-End
The financial market has once again adjusted its inflation estimate for this year downward. According to the Focus Report, released by the Central Bank (BC) on Monday (1st), the expectation for the Broad Consumer Price Index (IPCA) fell from 4.86% to 4.85%, marking the fourteenth consecutive reduction.
Projections have also been revised for the coming years: in 2026, inflation is expected to be 4.31%, slightly below the previously forecasted 4.33%. For 2027 and 2028, the expectation is 3.94% and 3.8%, respectively.
Despite the decline, the estimate for 2025 remains above the upper limit of the inflation target set by the National Monetary Council (CMN), which is 3% per year, with a tolerance of 1.5 percentage points up or down — that is, between 1.5% and 4.5%.
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In July, the official inflation measured by IBGE increased by 0.26%, driven by higher electricity costs, but with a decrease in food prices for the second consecutive month. Over the past 12 months, the IPCA totaled 5.23%, also above the target limit.
Selic at 15% Per Year
To control inflation, the Central Bank primarily uses the basic interest rate (Selic), currently at 15% per year. After seven consecutive increases, the Monetary Policy Committee (Copom) decided to halt the rate hikes at the last meeting in July, in light of easing inflation and signs of economic slowdown.
In a statement, Copom noted that the trade policy of the United States has increased uncertainties about global prices, and indicated that it intends to maintain the Selic at the current 15%, although it does not rule out further increases if necessary.
Market forecasts indicate that the rate should end 2025 still at 15%, drop to 12.5% in 2026, and continue to decline, reaching 10.5% in 2027 and 10% in 2028.
High rates, in theory, help to contain inflation by making credit more expensive and encouraging savings. On the other hand, they also limit economic expansion, as companies and consumers cut back on investments and spending.
GDP Slightly Up and Dollar Above R$ 5.50
The estimate for the growth of the Gross Domestic Product (GDP) has also been adjusted, rising from 2.18% to 2.19% in 2025. For the following years, the market projects expansion of 1.87% in 2026, 1.89% in 2027, and 2% in 2028.
The strong performance of agriculture helped boost the Brazilian economy, which grew 1.4% in the first quarter of this year. In 2024, GDP closed with a rise of 3.4%, marking the fourth consecutive year of growth and the best result since 2021, when it reached 4.8%.
The forecast for the dollar is R$ 5.56 by the end of 2025. For 2026, the expectation is for an exchange rate close to R$ 5.62.
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