# Brazil's Central Bank Raises Inflation Forecasts Amid Economic Headwinds Copom cites global conflicts, climate events, and currency volatility as key inflationary pressures. - **Source:** [Folha de S.Paulo](https://www.folha.uol.com.br) - **Published:** 2026-11-10 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/02860409-0ab8-4668-92a5-7d7ed15f2ae6 ## Inflation Forecasts Revised Upward The Brazilian Central Bank's monetary policy committee, Copom, has raised its inflation projections due to mounting economic pressures. Estimates for this year increased from 5.2% to 5.6%, while 2027 forecasts climbed to 4.7%. These figures remain significantly above the central target of 3%, signaling a challenging environment for the nation's monetary authorities. ## Four Primary Supply Shocks Policymakers identified four specific factors driving the current inflationary trend. These include the ongoing conflict in the Middle East, the climate impact of El Niño, the end of the 6x1 work scale, and the sharp appreciation of the dollar. These combined shocks have disrupted supply chains and increased costs across the domestic economy. ## Stagnation of Interest Rates On November 4, Copom halted its interest rate cutting cycle, maintaining the Selic benchmark rate at 13.75%. This decision reflects a cautious stance following five consecutive cuts of 0.25 percentage points earlier this year. The committee emphasized that the current level of interest rates is already substantially elevated, impacting overall economic activity. ## Economic Activity Deceleration The committee observed clear signs of a slowdown in domestic economic activity, supported by second-quarter GDP results. Projections now suggest growth will remain below the country's potential. This cooling demand is a critical factor, as it may potentially mitigate the secondary effects of the supply shocks that are currently fueling persistent inflation. ## Market Turbulence and Policy Following the reelection of President Luiz Inácio Lula da Silva, financial markets experienced notable volatility. This instability contributed to inflation expectations drifting further from the official target. The Central Bank continues to monitor these developments closely, as the current model of continuous targets requires inflation to remain within the tolerance range. ## Targeting Future Stability Given the lagged effects of monetary policy, the Central Bank is currently focusing its projections on the second quarter of 2028. For this period, the inflation estimate stands at 3.5%, incorporating the supply shocks observed since September. This long-term view is essential for managing expectations despite the immediate pressures facing the Brazilian economy. ## Compliance with Inflation Targets The official inflation target is 3%, with a tolerance margin of 1.5 percentage points. A breach is officially recognized if inflation remains outside the 1.5% to 4.5% range for six consecutive months. Current data suggests that the committee faces a difficult path to bring indicators back within these established institutional boundaries. ## Upcoming Policy Decisions Copom is scheduled to meet again on December 8 and 9 for the final session of 2026. Recent meetings have faced challenges, with seven out of eight sessions operating with a reduced quorum due to the absence of two directors. These upcoming discussions will be vital for determining the trajectory of monetary policy. ## Sources covering this story - https://redir.folha.com.br/redir/online/emcimadahora/rss091/*https://www1.folha.uol.com.br/mercado/2026/11/ata-do-copom-mostra-expectativa-de-inflacao-mais-alta-com-guerra-el-nino-fim-da-6x1-e-disparada-do-dolar.shtml — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._