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Brazil’s Growth Loses Steam as Disinflation Takes Hold, Setting Up March Rate-Cut Debate

Markets increasingly see inflation slipping below 4%, focusing attention on whether Copom starts easing with a 0.25 or 0.50 point move.

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Overview

  • IBGE-based readings for late 2025 point to near-zero quarter-on-quarter GDP in Q4, with full-year growth estimated around 2.2% to 2.3%.
  • Sector data show industry weakening the most, services still expanding, and retail restrained where purchases depend more on credit.
  • Brazil’s IPCA rose 0.33% in January and the 12‑month rate edged up to 4.44% after 4.26% in December.
  • Boletim Focus medians project the 12‑month inflation rate near 3.6% in February and broadly between 3% and 4% through 2027.
  • Copom signaled a likely start to rate cuts in March, with economists split between a 0.25 or 0.50 percentage‑point first step as past hikes to 15% cool activity and sticky services prices complicate timing.