Brazil Economic Outlook. June 2026

Summary

Growth is likely to be stronger than previously expected in 2026 and weaker in 2027, but should remain close to 2%. Higher inflation, around 5% in 2H26, driven mainly by the global energy shock, will constrain the scope for further monetary easing, although additional Selic cuts remain likely.

Key points

• Key points:
• Growth is expected to remain around 2% in 2026–27. The 2026 forecast has been revised up by 0.4pp to 2.1%, reflecting resilient economic activity and pre-election fiscal stimulus. The 2027 forecast has been revised down by 0.2pp to 2.0%, on higher-than-expected inflation and interest rates.
• Inflation has recently surprised to the upside, largely reflecting higher input costs following the outbreak of the Iran war, but also persistent demand pressures. Inflation is now expected to be around 5.0% in the second half of the year and to converge to 4.0% in 2027, with risks tilted to the upside.
• The less favorable inflation outlook leaves less room for monetary easing. While the central bank is still likely to continue cutting rates by 25bp at upcoming meetings, taking the Selic rate to 13.0% by year-end, inflation concerns could force the monetary authority to delay the easing cycle.
• The real is likely to weaken ahead, reflecting uncertainty ahead of the 4Q26 general elections and a narrowing interest rate differential with the US. Nevertheless, if fiscal imbalances are reined in as expected, relatively high interest rates should continue to support the currency.

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