Brazil Economic Outlook. September 2026

Brazil’s economy is slowing: growth is expected to reach 2.1% in 2026 and 1.8% in 2027. Supply-side pressures will push inflation higher, but weak demand will likely allow for further Selic rate cuts. The post-election political landscape will shape the outlook and the balance of risks.

Key points

• Key points:
• Growth continues to soften and is now forecast to reach 2.1% in 2026 and 1.8% in 2027, with risks tilted to the downside. The slowdown is likely to be driven by tight monetary conditions, despite the gradual decline in the Selic rate; the impact of a more severe El Niño, particularly on the primary sector; and an eventual, though still uncertain, fiscal consolidation following the 4Q26 elections.
• Inflation will likely rise over the next few months, mainly due to the effects of El Niño and persistent tensions in the Middle East. However, subdued domestic demand should help contain inflationary pressures, with inflation expected to end this year and next at around 4.8% and 4.0%, respectively, close to the target range’s upper-bound (4.5%).
• The door for further monetary easing remains open. Slowing activity, signs of credit stress and a broadly stable exchange rate should allow the Selic rate to decline to 13.25% by Dec/26 and continue falling in 2027, provided fiscal risks are addressed as expected. Still, given higher Fed rates, the easing cycle will likely proceed more gradually than previously anticipated.
• The post-election political landscape remains highly uncertain and will be key to shaping the outlook and balance of risks. Fiscal policy will be at the center of attention, with measures needed to stabilize, or at least slow the rise in, public debt. A failure to move in this direction could trigger renewed macroeconomic and financial volatility.

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