The Brazilian analysts raised their interest rate forecasts for the end of 2026as central bankers say they have all policy options on the table to contain inflation above target.
The benchmark Selic rate will reach 9.5% in December 2026, up from a previous estimate of 9%, according to a weekly survey by the central bank published on Monday. Analysts kept their estimates unchanged for the end of 2024, at 10.5%, and for the end of 2025, at 10%..
Central bank governor Roberto Campos Neto said on Saturday that a labor market tight is making Brazil’s fight against consumer prices slower than expected and the local disinflation process is “stalling”Policymakers have kept borrowing costs unchanged at 10.5% since June, when they paused a nearly year-long easing cycle. Traders are betting the bank will raise rates as early as next month.
Rising utility costs, above-target consumer price estimates and a weaker currency are adding upward pressure to inflation, central bankers wrote in the minutes of their latest policy meeting published on Aug. 6, adding that the outlook calls for “even greater caution.” In recent speeches, policymakers have reiterated that they remain data-dependent with all rate options on the table.
The President Luiz Inacio Lula da Silva could soon name a replacement for Campos Neto, whose term ends in DecemberThe central bank’s monetary policy director, Gabriel Galipolo, who is seen by many as Lula’s choice to lead the bank, said recently that an increase in borrowing costs will also be considered at the next rate-setting meeting in September.
Analysts see the consumer price increases at 4.25% this December, up from a previous estimate of 4.22%, according to the survey. Inflation estimates for 2026 and 2027, both of which are seen as a measure of the central bank’s credibility among investors, remain above the 3% target. Over a 12-month horizon, similar to the bank’s current inflation regime, consumer prices are seen rising by 3.83%.
