Markets expect higher Brazilian rates after President Lula’s re-election raised
prospect of larger public spending and upward pressure on inflation. A weekly
survey by economists for the Brazil central bank showed expected Selic at 13.75%
next month, up from 13.5% previously; economists have raised end-2026 rate
expectations for a second consecutive week. Analysts lifted their year‑end
inflation forecast to 4.9% from 4.76%, well above the 3% target. Lula’s surprise
win has reversed investor hopes of a policy shift, triggering sharp losses in
the Brazilian real and equities and adding fiscal and currency weakness risks
that could further accelerate inflation. Last week the central bank paused its
easing cycle, holding Selic at 13.75% after months of cuts and warning of
Slowing growth, accelerating inflation and high uncertainty.
