What next for inflation and interest rates in Brazil?

Brazil’s inflation outlook appears increasingly worrying, and the headline rate is likely to hit around 6% y/y by year-end, which is a bit higher than most expect. That’s likely to trigger a few more rate hikes in the coming months, taking the Selic rate to 15.00%. But in spite of the poor short-term inflation outlook, we think there will be scope for Copom to turn to rate cuts around the end of the year and the Selic rate could ultimately be lowered by more than others anticipate in 2026-27.