The government has increased its inflation projection for the current year to 5.1% from the 4.5% estimate produced in May, placing consumer price gains above the central bank's 3% target and its 1.5 percentage point tolerance band in either direction.
Officials at the Economic Policy Secretariat within the Finance Ministry, who produce the government's official macroeconomic forecasts, said supply-side dynamics continued to exert upward pressure on food prices. They highlighted fresh agricultural products - specifically milk, rice and beans - as posting price increases that outpaced their historical patterns.
Beyond food, the ministry noted an acceleration in inflation for manufactured goods, attributing that trend in part to higher prices for personal care items. Services inflation also remained elevated in the latest readings, even as some underlying measures of inflation have shown signs of slowing over recent months.
On the output side, the government left its estimate for gross domestic product growth unchanged at 2.3% for the year, observing that economic activity remained resilient through May. At the same time, the ministry cautioned that high real interest rates are expected to slow the pace of growth ahead - and that the full effect of those restrictive financing conditions will take time to pass through the economy.
Monetary policy developments provide context for the government's outlook. The central bank reduced the policy rate by 25 basis points in June, marking the third consecutive meeting with a cut and bringing the benchmark Selic rate to 14.25%. The bank signaled that it may revisit policy in August and reiterated that borrowing costs need to stay at restrictive levels in order to return inflation toward the target.
Looking further ahead, the government adjusted its 2027 inflation forecast slightly higher to 3.6% from 3.5% while trimming its GDP growth projection for that year to 2.5% from 2.6%.
What this means
- Inflation has been revised higher in the near term, driven by supply pressures in food and wider price rises in goods and services.
- Growth projections for the current year were held steady, but policymakers anticipate downward pressure from sustained high real interest rates.
- Officials see some easing in core inflation measures, even as headline figures remain elevated.