Brazil's financial market raises 2026 interest rate forecast to 14 pct

Alsharq Tribune-Otaify 

Brazil's financial market again raised its forecast of the benchmark interest rate, from 13.75 percent to 14 percent by the end of 2026, the Central Bank of Brazil said Monday.

According to the weekly Focus survey of the country's leading financial institutions released by the bank, four weeks ago analysts expected the benchmark interest rate for the Brazilian economy, called Selic, to register 13.25 percent annually, but persistent inflationary pressures led to the upward adjustment.

Last week, the central bank's Monetary Policy Committee lowered the Selic rate from 14.50 percent to 14.25 percent, marking the third reduction in a row and signaling that the monetary easing cycle will be shorter than previously expected.

The committee noted the international landscape remains uncertain due to the lack of a clear end to the armed conflict in the Middle East, with repercussions for global financial conditions.

Market analysts also raised their inflation forecast for this year, from 5.30 percent to 5.33 percent, the 15th consecutive increase, and for next year, from 4.10 percent to 4.15 percent.

This year's official target inflation is 3 percent annually, with a margin of tolerance of plus or minus 1.5 percentage points.

Regarding the performance of the Brazilian economy, analysts slightly upgraded their GDP growth forecast for 2026 from 1.96 percent to 1.98 percent, while maintaining it at 1.70 percent for 2027.

As for the country's currency exchange rate, currently averaging 5.14 reals to the U.S. dollar, analysts expect to see 5.20 reals to the dollar by the end of 2026 and 5.27 reals to the dollar in 2027.

The trade balance is projected to see a surplus of 76.2 billion dollars in 2026, and 75 billion dollars in 2027.

Foreign direct investment inflows are expected to reach 75 billion dollars this year and 78.25 billion dollars next year.