The Hormuz observatory

BRAZIL ECONOMICS - Report 19 Mar 2026 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

In light of what has occurred in recent weeks, and even of the market pricing of interest rates, Copom reducing the target for the Selic rate by 0.25 p.p. to 14.75% per year was no surprise.

That said, I did not anticipate the increase in the Central Bank’s inflation projection for the relevant horizon (the 12-month period until September 2027) given the appreciation of the exchange rate in the period (BRL 5.20/USD against BRL 5.35/USD, a decline of 2.8%).

Obviously, the conflict in the Middle East, now incorporated into Copom’s scenario, implies an increase in commodity prices, particularly energy commodities, as well as disruptive effects on supply chains. However, given that the Central Bank’s relevant horizon begins only in October 2026, it remains to be seen which factors could affect the inflation projection in a relatively distant period, since the phenomena above would probably materialize in the coming months, before, therefore, the period in question.

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