BRAZIL · ECONOMY
Key Facts
- The country Brazil is South America’s largest economy, and its central bank has cut the Selic benchmark rate to 13.75% in a series of moves this year.
- Why it matters A forecast of weaker growth, higher inflation and no further rate cuts bears on US investors in Brazilian assets and on US exporters, who sold an estimated US$54.3 billion of goods to Brazil in 2025.
- Why now The forecast was published on Friday 30 October 2026, after the dollar’s biggest weekly gain against the real since October 2008 and days before the central bank’s rate meeting on 3 and 4 November 2026.
- What happened Itaú cut its 2027 growth forecast for Brazil to 0.5% from 1.2% and raised its 2027 inflation forecast to 6.1% from 4.6%.
- The numbers The bank now expects the Selic to stay at 13.75% through 2027, against an earlier forecast of 12.50% at the end of 2027.
- What it means for you Brazilian bonds, stocks and the real face a forecast of slower growth and a rate hold, which matters for US funds, exporters and travelers.
- Still open Whether other banks follow Itaú with similar cuts is not yet known, and the central bank’s decision on 4 November 2026 will show whether it pauses its cuts.
- Prediction markets Polymarket prices no change in the Selic at the 3 and 4 November 2026 meeting at 78.4% and a 25-basis-point cut at 19.0%, on US$122,868 of total volume, as of 4:34 a.m. ET on 31 October 2026.
- Power Index Brazil ranks 1st of 14 in The Rio Times Latin America Power Index, with 75.0 points (October 2026 edition).
In Plain English
The Selic is Brazil’s benchmark interest rate, set by the central bank’s Monetary Policy Committee, known as Copom. The IPCA is Brazil’s official consumer price index, and the central bank targets 3% inflation with a ceiling of 4.5%, according to Folha.
The Focus survey is a weekly central bank poll of market economists that reports median forecasts for growth, inflation and interest rates. A basis point is one hundredth of a percentage point, so a 25 basis point cut is a quarter-point cut.
Brazil’s Itaú bank cut its 2027 growth forecast for Brazil to 0.5% from 1.2% on Friday 30 October 2026 and now expects 2027 inflation of 6.1%, well above the official ceiling, according to Folha. The bank also expects the central bank to stop cutting interest rates at its next meeting and to hold the Selic at 13.75% through all of 2027, a path that matters to US investors in Brazilian bonds and to US exporters selling into the market.
The revision lands after the dollar rose 9.15% against the real in the week after the 25 October runoff, the largest weekly gain since October 2008, according to Agência Brasil. The central bank’s PTAX rate was 5.4212 reais per US dollar on Friday 30 October 2026, against 5.0377 on Friday 23 October 2026.
What Itaú Changed
For 2027, Itaú now sees growth of 0.5% against 1.2% before, and inflation measured by the IPCA at 6.1% against 4.6%, according to Folha. The central bank’s target is 3% with a ceiling of 4.5%, so the new inflation forecast sits 1.6 percentage points above the ceiling.
For 2026, the changes are smaller, with growth moving from 1.7% to 1.6% and inflation from 5.1% to 5.2%. Itaú also estimates that output fell 0.1% in the third quarter from the second, slightly below its own expectation, Folha adds.
On interest rates, Itaú had projected the Selic at 12.50% at the end of 2027 and now expects it to stay at 13.75%. The central bank’s own records show that its committee cut the Selic to 14.25% on 17 June 2026, to 14.00% on 5 August 2026 and to 13.75% on 16 September 2026.
Why Inflation Is Seen Rising
Folha reports that most of the inflation revision comes from tax and regulatory changes now built into the bank’s base case, plus a more expensive dollar on average. On fuel, the bank assumes the return of federal PIS/Cofins taxes on gasoline, the end of the diesel subsidy in the second half of the year and an already announced state ICMS tax adjustment.
Itaú also built in the possible price effects of Brazil’s tax reform and of labor schedule changes, including the end of the six-day work week promulgated in October 2026, which raise labor costs. Recent data also pushed the forecast up, because food and services prices are accelerating again while industrial goods show more benign price behavior.
The bank’s balance of risks stays tilted to the upside, with the main factor a weaker currency and higher oil passing through to domestic fuel prices, according to Folha’s account of the report. Downside risks come from keeping fuel subsidies in place and from free bus transport on weekends and holidays.
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How the Forecast Compares
The central bank’s Focus survey of market economists, with data to Friday 23 October 2026, had a median 2027 growth forecast of 1.31% from 113 respondents and a median 2027 inflation forecast of 4.34%. Itaú’s new numbers are therefore well below the survey on growth and well above it on inflation, although the survey predates the election-week selloff.
The central bank’s own reference scenario in its 16 September 2026 statement projected 2027 IPCA inflation of 3.9% on an exchange rate starting at 5.15 reais per US dollar. The 30 October PTAX rate is about 5% above that assumption, and the statement listed a persistently weaker currency among its upside risks for inflation.
What Prediction Markets Say
On Polymarket, traders put the chance of no change in the Selic at the Copom meeting on 3 and 4 November 2026 at 78.4% and a quarter-point cut at 19.0%, as of 4:34 a.m. ET on 31 October 2026. The market has traded US$122,868 in total, and the no-change price has risen by about 61 points over the past week.
The contract resolves on the change in the Selic target announced by the central bank after the November 2026 meeting, so it measures the rate decision and not the economy. These are bets, not polls, and trading of about US$3,400 in the past 24 hours means prices can move on small trades.
Why we show this: prediction markets turn real-money bets into a live probability that moves within minutes of the news, which is why investors, campaigns and newsrooms in the United States now follow them closely. We show them next to polls and official results, never instead of them.
What It Means for You
For US investors in Brazilian assets, the revision adds a forecast of slower growth and a rate hold to a week in which the Ibovespa fell 18.12%, its worst week since March 2020, according to Agência Brasil. A weaker real also cuts the dollar value of reais earnings and of bonds that pay in the local currency.
For US exporters and travelers, a weaker real makes each dollar go further inside Brazil, while slower growth can cool demand for imports, and US goods exports to Brazil were an estimated US$54.3 billion in 2025, according to the Office of the US Trade Representative. Earlier coverage of the rate-pause bets after the real’s slide and the Brazil section give more background.
What Is Not Known
It is not known whether other Brazilian banks will follow Itaú with similar cuts, because the Focus survey has not yet captured post-election revisions. The next Focus survey is due on Monday 2 November 2026, and the central bank’s decision follows on 4 November 2026.
It is also unclear how far the real and fuel prices will move, which Itaú names as the main upside risk to its inflation forecast. The full Itaú report could not be read directly, so its figures are as reported by Folha.
Frequently Asked Questions
What did Itaú forecast for Brazil’s economy?
Itaú cut its 2027 growth forecast to 0.5% from 1.2% and raised its 2027 inflation forecast to 6.1% from 4.6%, according to Folha. It expects the Selic to stay at 13.75% through 2027.
What is the Selic rate?
The Selic is Brazil’s benchmark interest rate, set by the central bank’s Monetary Policy Committee. The committee cut it to 13.75% from 14.00% on 16 September 2026.
When is Brazil’s next interest rate decision?
The Monetary Policy Committee is scheduled to meet on 3 and 4 November 2026, with the decision due on 4 November. Polymarket traders put the chance of no change at 78.4% as of 31 October 2026.
How much did the dollar rise against the real after the Brazilian election?
The dollar rose 9.15% against the real in the week after the 25 October runoff, the largest weekly gain since October 2008, according to Agência Brasil. The central bank’s PTAX rate was 5.4212 reais per US dollar on 30 October 2026.
How does Itaú’s forecast compare with the market?
The central bank’s Focus survey of 23 October 2026 had median 2027 forecasts of 1.31% growth and 4.34% inflation. Itaú’s forecasts of 0.5% and 6.1% are far from those medians.
Sources: Folha, 30 October 2026 (Itaú forecast revision); Banco Central do Brasil, Copom statement of 16 September 2026; Banco Central do Brasil, Selic target series 432; Banco Central do Brasil, Focus survey data to 23 October 2026; Banco Central do Brasil, PTAX of 30 October 2026; Agência Brasil, 30 October 2026 (dollar and Ibovespa); Office of the US Trade Representative, Brazil page; Polymarket market data for the November 2026 Selic decision, pulled at 4:34 a.m. ET on 31 October 2026.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief
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