Brazil Economic Outlook. October 2025

Summary

The Brazilian economy has been losing momentum, reinforcing deceleration prospects. GDP is expected to slow to 2.2% in 2025 and 1.5% in 2026, helping inflation ease to 4.8% by end-2025 and 3.7% by end-2026, paving the way for a monetary easing cycle from early 2026.

Key points

• Key points:
• Growth deceleration prospects remain unchanged: GDP is forecast to expand 2.2% in 2025 and 1.5% in 2026, less than in recent years, mostly due to tighter monetary conditions, a smaller fiscal impulse and US tariffs. Still, tight labor markets and potential stimulus ahead of 4Q26 elections should prevent a sharper slowdown.
• Inflation has eased more than expected lately, and is set to decline further. Year-end forecasts have been revised down to 4.8% for this year and 3.7% for next. Softer domestic demand and a stronger Brazilian real are the main drivers of the expected moderation.
• Policy interest rates will likely remain unchanged at 15% through 2025, with a monetary easing expected to begin in early 2026. They are forecast to gradually converge to 11% by the end of the next year, still a restrictive level.
• A deterioration in relations with the US, political tensions, and fiscal and climate shocks are the main sources of risk. Still, if managed effectively, Brazil’s could grow above 2% from 2027 onwards, exceeding current expectations.

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