Market bets on Selic rate being maintained in 2025 for the 6th week in a row; inflation forecast falls

The Focus report projections show a cooling of inflation in 2025, an upward revision of the growth of the Gross Domestic Product (GDP) , maintenance of the Selic rate in 2025 and a fall in the dollar exchange rate.

The median for the IPCA in 2025 fell from 5.44% to 5.25%. It is now 0.75 percentage points above the target ceiling of 4.50%. For 2026, the forecast remained at 4.50% for the fifth consecutive week, close to the target ceiling.

The Central Bank expects the IPCA to reach 4.8% in 2025 and 3.6% in 2026, according to the trajectory disclosed in the Monetary Policy Committee (Copom) statement in May. The end of next year is the relevant horizon for the committee.

Starting this year, the inflation target is continuous, based on the IPCA accumulated over 12 months. The center is 3%, with a tolerance of 1.5 percentage points either way. If the IPCA falls outside this range for six consecutive months, the Central Bank is considered to have missed the target.

Focus' median inflation forecast for 2027 remained at 4.0% for the 17th consecutive week. The projection for the IPCA in 2028 remained at 3.85%. A month earlier, it was 3.80%.

GDP

The median GDP growth forecast for 2025 rose from 2.18% to 2.20%. A month earlier, it was 2.02%.

Copom stated in the minutes of its May meeting that the "significantly contractionary" interest rate has contributed to moderating activity growth. According to the committee, this process is likely to gain momentum in the coming quarters.

In its latest Monetary Policy Report (RPM) in March, the Central Bank reduced its GDP growth projection for 2025 from 2.1% to 1.9%. The estimate will be updated on the 26th, when the monetary authority releases a new edition of the RPM.

Focus’s intermediate estimate for Brazilian economic growth in 2026 increased from 1.81% to 1.83%. The median for GDP growth in 2027 remained at 2.0% for the 11th consecutive week. The intermediate estimate for 2028 remained stable at 2.0% for the 66th consecutive week.

Selic

Focus' projections for the Selic rate at the end of 2025 remained at 14.75% for the sixth consecutive week. Interest rates have been at this level since May 7, when Copom raised the rate by 0.5 percentage points. The committee meets again this week.

The market is divided on the Copom's decision this Wednesday, the 18th. Of 48 institutions consulted by Projeções Broadcast, the majority - 27, or 56% - expect interest rates to remain at 14.75%. Another 21, or 44%, predict an increase of 0.25 percentage points, to 15%.

At the end of Friday afternoon, the interest rate curve indicated a 56% chance of a 0.25 point increase in the Selic rate this week, against a 44% probability of maintaining the rate at 14.75%.

In the minutes of the May meeting, Copom stated that, given the high uncertainty in the scenario and the advanced stage of the adjustment cycle, it would need "caution and flexibility" to make its decision this week.

Central Bank President Gabriel Galípolo has been emphasizing that the Committee has adopted a data-dependent stance. On the 2nd, at an event held by the Center for Public Policy Debates (CDPP), he stated that the monetary authority will monitor economic figures to determine whether the Selic rate is sufficiently restrictive.

The median for the Selic rate at the end of 2026 remained stable at 12.50% for the 20th consecutive week. Considering only the 99 projections updated in the last five business days, the intermediate estimate also remained at 12.50%.

The projection for the end of 2027 remained at 10.50% for the 18th consecutive week. The median for the Selic at the end of 2028 remained at 10.0% for the 25th consecutive week.

Dollar

The Focus report's median estimate for the dollar exchange rate at the end of 2025 fell from R$5.80 to R$5.77. A month earlier, it was R$5.82. The intermediate estimate for the US currency at the end of 2026 fell from R$5.89 to R$5.80. Four weeks ago, it was R$5.90.

The projection for the dollar at the end of 2027 remained at R$5.80 for the fifth week in a row. The median for the end of 2028 remained at R$5.80 for the second week in a row. Four weeks ago it was at R$5.85.

The annual exchange rate projection published in Focus is calculated based on the average rate for the month of December, and no longer on the value projected for the last business day of each year, as was the case until 2020.