Monetary authority revises 2026 growth from 1.6% to 2% and estimates IPCA above the target ceiling of 4.5% at the end of the year
The increased its estimate for Gross Domestic Product (GDP) growth in 2026 from 1.6% to 2.0% and indicated that inflation should remain above the upper limit of the target over the next few months.
The data is contained in the Monetary Policy Report released on Thursday (June 25, 2026). Here is it (PDF – 3MB)
The document shows an economy that is stronger than expected, at the same time that it records a deterioration in the inflationary scenario, a relevant factor for the conduct of monetary policy.
The Central Bank stated that the revision to GDP is due to the stronger performance of the economy in the 1st quarter, when activity increased 1.1%, in addition to the improved outlook for agriculture and the extractive industry.
The monetary authority also highlighted the greater dynamism of domestic demand, associated with fiscal and credit stimuli. This movement is important because a more heated economy tends to make the process of inflation convergence towards the target more difficult.
The document shows that the IPCA (Broad National Consumer Price Index) accumulated over 12 months went from 3.81% in February to 4.72% in May, exceeding the upper limit of the target tolerance range, set at 4.5%.
The Central Bank attributes part of this pressure to the rise in food, regulated and fuel prices, influenced by the conflict in the Middle East.
In the projections of the reference scenario, inflation accumulated over 4 quarters should reach 5.2% at the end of 2026. After that, the trajectory is one of deceleration, reaching 3.1% at the end of 2028. For the relevant horizon of monetary policy, currently the 4th quarter of 2027, the projection is 3.7%.
The report also highlights that inflation expectations remain unmoored and that there has been an increase in projections for 2026, 2027 and 2028. According to the monetary authority, the external environment remains uncertain due to the consequences of the conflict in the Middle East, which has raised energy prices and increased volatility in global markets.
At the meeting held on June 16 and 17, the Monetary Policy Committee reduced the Selic rate to 14.25% per year and stated that it will continue to evaluate new information to ensure the convergence of inflation to the target.
UNDERSTAND
The Monetary Policy Report presents the policy guidelines adopted by the Copom and its assessment of recent developments and economic prospects, especially inflation projections. It is one of the main documents of monetary policy.
Between 1999 and 2024, this document was called the Inflation Report.
