In the Focus Bulletin economic weekly survey released by Brazil's central bank on the 28th, private analysts' forecast for 2026 inflation based on the IPCA expanded consumer price index was raised to a 4.99% rise from the previous week's forecast of a 4.92% rise. It was the second consecutive weekly increase, and a month earlier the forecast was a 5.01% rise. The backdrop is the persistence of inflation risks stemming from the war in Iran. The 2027 forecast was also raised to a 4.31% rise from a 4.30% rise, and a month earlier it stood at a 4.28% rise. Meanwhile, the forecast for 2026 real GDP growth was cut to 1.86% from the previous week's 1.88%, the third consecutive weekly downgrade, and a month earlier it was 1.92%. The 2027 forecast was also cut to 1.41% from 1.43%, and a month earlier it was 1.50%. The policy interest rate forecast for the end of 2026 was left unchanged at the previous week's 13.50%, and a month earlier it was 13.75%. The forecast for the end of 2027 was also left unchanged at 12.00%, marking the fifteenth consecutive week without a change. The forecast for the next meeting on November 4 was cut to 13.50% from 13.63%, the second consecutive weekly downgrade, and a month earlier it was 13.75%. Since the current rate is 13.75%, this implies a 0.25 percentage point cut. The exchange rate forecast against the dollar for the end of 2026 was left unchanged at the previous week's 5.20 reais, unchanged for the fifteenth consecutive week, while the end-2027 forecast was also left unchanged at 5.28 reais, unchanged for the second consecutive week, and a month earlier it was 5.30 reais.
Focus survey shows 2026 inflation forecast raised to 4.99% and a 0.25pp rate cut expected on Nov 4, with the FX forecast held at 5.20 reais, signaling a weaker-rate/stronger-real policy backdrop.
