Focus Survey Raises Brazil’s Year-End 2027 Rate Forecast to 12.50%
Key Facts
Economists raised their forecast for Brazil’s Selic interest rate at the end of 2027 to 12.50% from 11.75% in the previous survey, according to the central bank’s weekly survey reported by Reuters. They also raised their forecast for the rate at the end of 2026 to 13.50% from 13.25%. The revision came in the first weekly poll since President Luiz Inácio Lula da Silva was re-elected on October 25. In the same survey, the forecast for inflation at the end of 2027 rose to 4.76% from 4.34%. The figures put the interest-rate outlook under pressure from expectations of higher inflation as the Monetary Policy Committee, known as Copom, prepares to announce its decision on November 4.
The revisions were not limited to interest rates: economists lowered their forecasts for gross domestic product growth to 1.76% in 2026 and 1.2% in 2027, compared with 1.8% and 1.31% in the previous survey, Reuters reported. That combines expectations of slower economic activity with higher inflation in 2027. Meanwhile, consumer prices rose 4.62% in the 12 months through mid-October, according to the IPCA-15 index, compared with 4.47% in the previous 12-month period. The exchange-rate forecast rose to 5.34 reais per dollar at the end of 2026 and 5.40 at the end of 2027, from 5.05 and 5.15 in the previous survey. These estimates reflect the widening pressures on currency, prices and activity that investors are monitoring.
The forecast revisions followed sharp market volatility after the election, according to a Reuters report. The real lost 8.5% against the dollar during the previous week, while the Bovespa index fell about 18% over the same period. Liam Peach of Capital Economics estimated that the currency’s post-election decline could add 0.3 percentage points to headline inflation over six months. The pass-through of currency moves to prices is one of the risks analysts cited in assessing the inflation outlook. Antonina Tarasyuk of Rimes Asset Management said she expects rate cuts to pause, saying the election made inflation expectations more challenging, particularly if oil remains above $100 a barrel.
Monetary policy faces a heavy fiscal burden: public-sector interest payments reached 8.99% of gross domestic product in the 12 months through September, a level not seen since January 2016, Reuters reported. Interest costs stand out as economists revise their growth and interest-rate forecasts, putting financing conditions under scrutiny by companies and households. In a separate Reuters poll, 33 of 48 economists expected the Selic to remain at 13.75% on Wednesday. The median forecast showed the rate staying at that level through the second quarter of 2027. Carlos Carranza of M&G Investments said, "The message will matter more than the actual policy rate, whether they cut rates by 25 basis points or leave them unchanged."
Copom will meet on November 3 and 4, with its monetary policy decision due on the afternoon of November 4, according to the schedule published by the Central Bank of Brazil. Expectations of a hold in the Reuters poll provide a separate indicator from the Focus survey, which raised its year-end rate forecasts for 2026 and 2027. Investors are focused on the upcoming decision and the bank’s message on inflation and the rate outlook. Carranza sees the bank’s guidance as potentially more significant than the size of any rate adjustment at the meeting. The decision comes after the currency and stocks fell in the previous week and inflation expectations rose, while weaker growth forecasts remain part of the economic picture markets are watching.