Brazil Central Bank Focus Survey: Inflation Slightly Revised Down, Pace of Rate Cuts Accelerates, Real Expected to Strengthen

(1) Inflation expectations: The 2026 IPCA inflation expectation has been slightly lowered from 5.22% to 5.19%; for 2027, inflation has edged up from 4.32% to 4.34%. Short-term inflation pressures have eased slightly, while medium- to long-term inflation is expected to rise modestly. (2) Benchmark interest rate (SELIC): The benchmark interest rate at the end of 2026 remains unchanged at 13.25%; the 2027 year-end rate expectation has been lowered from 12.00% to 11.75%, with the market betting on stronger rate cuts next year. (3) Economic growth: The 2026 GDP growth rate has been cut from 1.83% to 1.80%; 2027 GDP has dipped slightly from 1.32% to 1.31%, with economic recovery momentum continuing to weaken. (4) Exchange rate outlook: At the end of 2026, the USD/BRL rate has appreciated from 5.13 to 5.05; at the end of 2027, the exchange rate has strengthened from 5.22 to 5.15, with capital inflows and high interest rates supporting a stronger local currency.