In its quarterly Monetary Policy report, the Central Bank explained that the reduced expectation for Brazilian GDP growth, estimated in December, is due to the local economy slowing down in the fourth quarter of last year, recording a mere 0.2% increase.
“The slowdown was more noticeable in sectors more sensitive to the economic cycle, in family consumption, and in fixed capital formation,” the report noted.
The Brazilian Central Bank also highlighted that the local economy is being impacted by the basic interest rates of 14.25% applied in the country to curb inflation.
This estimate is lower than the Brazilian government’s projection, which anticipates a GDP growth of 2.3% this year. In 2024, the Brazilian economy grew by 3.4%.
Regarding inflation, the report emphasized that “economic analysts’ expectations for inflation have worsened for this year and the coming years, moving further away from the inflation target of 3%.”
According to the Brazilian Central Bank, inflation in the country will close 2025 at 5.1%, above the target of 3%, with a tolerance of 1.5% either way.
“Under the reference scenario projections, inflation remains above the tolerance interval limit throughout 2025, starting to decline from the fourth quarter but still remaining above the target,” the report indicated.
In this scenario, the institution projected that the cumulative four-quarter inflation in Brazil will be “in the range of 5.5% to 5.6% in the first three quarters of 2025, decreasing to 5.1% at the end of the year, 3.7% in 2026, and 3.1% in the last considered period, referring to the third quarter of 2027.”
The Central Bank of Brazil forecasts an inflation rate of 3.9% in the third quarter of 2026.
