The Brazilian Ministry of Finance revised its inflation projections upward for 2025 and 2026 while maintaining its economic growth forecast. Officials now expect inflation to reach 4.9% in 2025, up from February’s 4.8% projection, and 3.5% in 2026, previously estimated at 3.4%.
The ministry kept its GDP growth forecast steady at 2.3% for 2025 and 2.5% for 2026. This contrasts with the robust 3.4% economic expansion Brazil achieved in 2024, suggesting a significant slowdown ahead as monetary tightening takes effect.
Brazil’s current inflation situation remains challenging. Annual inflation surged to 5.06% in February 2025, marking a 17-month high and exceeding the Central Bank’s upper tolerance threshold of 4.5%. Food prices continue to drive inflationary pressures, with food inflation reaching 7.25% in January.
The government expects food prices to decelerate, service costs to stabilize, and industrial goods prices to accelerate through year-end. Officials attribute the revised inflation outlook to “small marginal changes in the expected scenario.”
Brazil’s Monetary Policy Committee plans to announce another interest rate increase today. Analysts widely expect a one percentage point hike in the Selic rate to 14.25%, continuing the tight monetary policy to combat persistent inflation.
Brazil Faces Economic Headwinds
The high interest rate environment creates headwinds for economic growth. The Finance Ministry attributes the expected economic slowdown to reduced credit and labor market stimulus. It also cites contractionary monetary policy and growing external uncertainties as contributing factors.
To combat rising food prices, the government recently eliminated import tariffs on various food products, including meat, coffee, sugar, and corn. The Brazilian real has also strengthened against the US dollar in 2025, with the American currency depreciating approximately 8%.
External factors complicate Brazil’s economic outlook. The SPE highlighted growing concerns about US policies related to import tariffs and immigration restrictions. These policies generate commercial tensions and market volatility.
Looking toward 2027, officials expect inflation to move closer to the Central Bank’s 3% target. The convergence timeline depends on monetary policy effectiveness, fiscal management progress, and global economic conditions.
