Brazil Ends 2025 With Softer Inflation Outlook, IGP-M Deflation and a Wider Fiscal Gap

Overview

• Market medians cut the IPCA forecast to 4.32% for 2025 and 4.05% for 2026, with the dollar seen at R$5.44 at end-2025 and R$5.50 in 2026.
• The Selic remains at 15%, and expectations point to 12.25% by the end of 2026, indicating a measured easing trajectory.
• GDP projections were kept at 2.26% for 2025 and 1.80% for 2026, as FGV’s Industry Confidence Index rose to 92.9 in December.
• The IGP-M fell 0.01% in December and closed 2025 down 1.05%, led by weaker producer prices, which can temper adjustments in IGP-M‑indexed contracts.
• Fiscal and external metrics worsened, with a R$20.2 billion central-government primary deficit in November and the 2025 current-account gap raised to US$74.85 billion amid thin year-end trading.