Brazil’s Central Bank revised its 2025 inflation projection downward to 5.46%, a marginal dip from 5.50%, while trimming GDP growth expectations to 2.13% amid persistent economic headwinds.
The adjustments, detailed in the bank’s weekly Focus Bulletin, reflect cautious optimism as policymakers grapple with balancing price stability and growth.
Inflation remains stubbornly above the government’s 3% target, hovering near the 4.5% tolerance ceiling. Economists attribute this to resilient food and energy costs, coupled with a weaker currency inflating import prices.
The Central Bank held its benchmark Selic rate at 14.75%, a 19-year high, to curb spending and anchor expectations. Borrowing costs have surged 425 basis points since September 2024, squeezing households and businesses.
First-quarter GDP growth of 1.4% outperformed expectations, driven by agriculture and consumer spending. However, momentum is expected to wane as high rates dampen investment.
The government revised its 2025 growth forecast to 2.4%, slightly above market estimates, citing robust farm output and labor market resilience. Analysts project slower expansion in later quarters, with full-year growth at 2.13%.
The Brazilian real is forecast to trade between R$5.80 and R$5.90 per dollar through 2028, reflecting fiscal risks and global dollar strength.
A stable currency helps mitigate import inflation but underscores investor caution. Fiscal challenges, including public debt concerns and election-year spending pressures, add uncertainty.
Businesses face a dual burden: rising input costs and restricted credit access. The Central Bank signals prolonged tight monetary policy, prioritizing inflation control over growth.
For families, elevated rates strain mortgage and loan repayments, while sticky inflation erodes wages. Policymakers walk a precarious line, aiming to avoid stagflation in a volatile global climate.
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