Brazil Focus Survey Lifts Inflation Forecast to 5.01%

Brazil’s central bank Focus survey has increased its 2026 inflation forecast to 5.01% from 4.99%. This report, released on Monday, 5 October, reveals that the median is now back above the 5% threshold, significantly above the official target range of 4.5%. For US investors, this figure is crucial as it determines the pace at which Brazil can reduce its interest rates, which are currently far higher than US levels.

The Focus survey, conducted weekly by Banco Central do Brasil, collects forecasts from banks, asset managers, and consultancies and publishes the median. Over the past 30 days, 144 institutions submitted their predictions for 2026 inflation. The 2026 forecast for Brazil’s official consumer price index, the IPCA, has risen for three consecutive weeks, surpassing 5% in the latest forecast.

This upward trend began in mid-September, dropping to 4.90% before starting to climb again. Four weeks ago, the median forecast was exactly 5.00%. Some economists who updated their numbers in the past five working days expressed more pessimism, with a median 2026 forecast of 5.07%, based on 41 responses. Forecasts for later years remain steady or slightly improved, with the 2027 forecast at 4.30% and the 2028 forecast at 3.80%, all still above the 3% target set by the National Monetary Council.

Despite recent declines in growth expectations, the central bank’s monetary policy committee anticipates at least one more quarter-point rate cut by the end of November, with no further cuts expected by year-end. The real exchange rate is expected to remain stable, with economists forecasting it to end 2026 at R$5.20 per US dollar and 5.28 per US dollar by the end of 2027.

The trade surplus for 2026 is expected to reach US$78.3 billion, while the current account deficit is projected at US$60 billion. Public finances are a concern, with a primary deficit of 0.41% of GDP expected this year and net public debt at 70.0% of GDP. The survey, published on Friday, 2 October, confirms that the 4.99% forecast is not an isolated occurrence.

For dollar-based investors in Brazilian bonds, the message is that interest rates will fall gradually, keeping the policy rate well above expected inflation and supporting the carry trade. A stable forecast for the real currency adds to its attractiveness, though election results could cause swift fluctuations. For US travelers and expatriates, the stable exchange rate forecast suggests that the dollar's purchasing power in Brazil will remain largely unchanged this year, despite rising prices in shops and restaurants.