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2mo ago

Brazil Lifts 2026 Inflation Outlook as Oil Shock Slows Rate-Cut Plans

The central bank says it will keep borrowing costs restrictive until inflation clearly heads toward its 3% target.

People look to the shelves with meat in Carrefour supermarket in Sao Paulo, Brazil November 27, 2024. REUTERS/Amanda Perobelli

Overview

  • Brazil’s Finance Ministry raised its 2026 inflation forecast to 4.5%, citing higher oil and fuel costs tied to the conflict in the Middle East.
  • The ministry lifted its average oil price assumption to $91.25 a barrel, about 25% above its March estimate.
  • With the key Selic rate at 14.50% after two 25-basis-point cuts, officials now see a slower easing path that would leave rates near 13% by year-end instead of 12%.
  • The central bank ruled out giving forward guidance and said policy will stay tight until inflation shows clear convergence to the 3% goal.
  • Economists in the central bank’s weekly survey now expect 4.92% inflation in 2026 and a year-end Selic of 13.25%, pointing to stickier price pressures.