Brazils Central Bank lifted the Selic rate to 14.25% last week, triggering fresh economic forecasts in its Monday, March 24, 2025, Focus Report.Financial markets now expect inflation to hit 5.65% in 2025, down slightly from 5.66%, but still far above the 3% target.
Growth projections dipped too, with GDP growth for 2025 revised to 1.98% from 1.99%.The rate hike, the fifth in a row, tackles a 5.06% inflation surge over the past year, spiked by a 1.31% jump in February from soaring electricity costs.
Analysts see the Selic climbing to 15% by year-end, with the real weakening to 5.95 per dollar in 2025 and 6 reais by 2026.The bank eyes stubborn service-sector prices, hinting at a smaller hike in May.Fiscal strain adds pressure, with public debt at 78% of GDP and a 2024 deficit near 8%.Last years 3.4% growth, the strongest since 2021s 4.8%, fades as tight policy bites.
Markets predict GDP at 1.6% in 2026, creeping to 2% by 2028, while the Selic eases to 12.5% in 2026 and 10% by 2028.Latest Focus Report Predicts Brazils Economic Squeeze.
(Photo Internet reproduction)Higher rates aim to cool demand, raising loan costs and favoring savings.
Banks, factoring in risks, charge more, slowing spending.
A future Selic drop could boost investment, but risks inflations return.Global trade tensions and a tight labor market, with unemployment at 6.5%, complicate the outlook.
The banks move reflects a balancing act: curbing prices without stalling growth.Businesses watch closely, as credit costs shape their plans.
Brazils economy, resilient yet vulnerable, hinges on this strategys success amid fiscal and global headwinds.