The first Focus bulletin after the October 25 runoff worsened nearly every key economic projection. Inflation above the target ceiling, interest rates frozen at punishing levels, a weakening real and declining growth define the market's formal assessment of four more years under the Lula regime.
BRASILIA — The first Focus bulletin released after the October 25 runoff delivered the financial market’s unequivocal verdict on four more years of the Lula regime: higher inflation, higher interest rates, a weaker real and lower growth — across every time horizon, without exception. The Central Bank survey, which aggregates median projections from dozens of financial institutions, worsened nearly every key indicator in a single week.
The median forecast for Brazil’s benchmark consumer-price index, the IPCA, rose from 5.19 percent to 5.22 percent for 2026 — already above the 4.5 percent ceiling of the Central Bank’s inflation target. For 2027, the projection jumped from 4.34 percent to 4.76 percent. Estimates for 2028 and 2029 were also raised, to 4.0 and 3.98 percent respectively. The market is not buying the regime’s narrative that prices are under control.
The interest-rate outlook tightened further. The expected Selic rate at year-end 2026 rose from 13.25 to 13.50 percent, with the five-day trimmed mean already pointing to 13.75 — the current level — which all but eliminates any rate cut at the Copom meeting concluding tomorrow. For 2027 the median jumped from 11.75 to 12.50 percent; for 2028, from 10.0 to 11.0; for 2029, from 10.0 to 10.25. The signal could not be clearer: punishingly high interest rates for the entire duration of the new mandate.
Why it matters
Brazil and the United States are the two largest economies in the Western Hemisphere, and what happens to Brazilian capital markets ripples outward. A Selic stuck near 14 percent means companies pay more to service debt, projects get shelved and the economy stalls — reducing demand for American exports from machinery to agricultural inputs. For anyone holding assets denominated in reais, the arithmetic is brutal: the currency is being steadily devalued by the very policies the reelected regime has promised to continue. The Economist recently warned that investors are already fleeing Brazil, and the Focus numbers show they have every reason to accelerate.
The exchange-rate forecast moved sharply. The dollar projection for year-end 2026 was revised from R$ 5.05 to R$ 5.34 — a jump of 29 centavos in a single week. The following years also worsened: R$ 5.40 in 2027 and 2028, R$ 5.45 in 2029. The real began losing ground the moment the election result was confirmed, and the market sees no reversal. For Brazilians with savings, the message is plain: every month that capital remains denominated in reais is a month of real loss. In an economy where 84.2 million citizens already cannot pay their monthly bills, a weakening currency makes the cost-of-living crisis even worse.
Growth projections fell in lockstep. The GDP median for 2026 dropped from 1.80 to 1.76 percent — the third consecutive decline. For 2027 it fell from 1.31 to 1.20 percent, also the third straight weekly downward revision. Less growth alongside more inflation and higher interest rates is the textbook definition of stagflation, and it is now the baseline scenario the market prices into Brazil’s next four years. Brazil’s stock market posted its worst week since the pandemic when it first digested the reelection. The Focus bulletin shows the damage is structural, not transient.
The record
Every figure cited above comes from the Central Bank’s own Focus survey, a weekly compilation of median forecasts submitted by more than a hundred registered financial institutions. It is not editorial opinion; it is the aggregated expectation of the professionals who allocate capital for a living. This edition is the first that fully incorporates the October 25 result, making it the market’s first formal assessment of what four more years of the Lula regime will cost the Brazilian economy. The diagnosis is unanimous and direct: more inflation above target, interest rates elevated for the entirety of the mandate, a currency in retreat and growth that barely registers. This happens under a government whose 2022 victory remains disputed by millions of Brazilians who allege electronic ballot fraud — and whose fiscal recklessness is now confirmed, in the market’s own numbers, as the policy trajectory for the next four years.
The Watch Post Daily will continue to follow this story.
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