After Lula's re-election, the financial market sees higher inflation and forecasts for interest rates and the dollar worsen significantly

After the re-election of President Luiz Inácio Lula da Silva on October 25, financial market economists made strong adjustments to their expectations for inflation, interest rates and economic growth this year and in the coming years.

In general terms, analysts considerably raised their inflation projections, reduced economic growth expectations and began to predict a higher interest rate than before. Estimates for the dollar also rose sharply.

The information is part of the "Focus Bulletin", released this Tuesday (3) by the Central Bank (BC), based on a survey carried out last week with more than 100 financial institutions.

For 2026, the inflation estimate grew from 5.19% to 5.22%;

For 2027, the expectation rose from 4.34% to 4.76%;

For 2028, the forecast remained at 3.75% to 4%;

For 2029, the estimate increased from 3.50% to 3.98%.

Since the beginning of 2025, with the adoption of the continuous target system, the objective has been to maintain inflation at 3%, with inflation being considered within the target if it varies between 1.50% and 4.50%.

Why does this matter? The higher the inflation, the lower the purchasing power of the population — especially among those earning lower salaries. This occurs because prices rise, while wages do not follow this increase.

For this year's Gross Domestic Product (GDP) growth, the financial market reduced its estimate from 1.80% to 1.76% last week.

As a result, analysts estimate a slowdown in the economy this year, given that, in 2025, GDP grew 2.3%, according to an official release from the Brazilian Institute of Geography and Statistics (IBGE).

The Gross Domestic Product (GDP) is the sum of all goods and services produced in the country and serves to measure the performance of the economy.

If GDP grows, it means that the economy is doing well and producing more. If GDP falls, it means the economy is shrinking. However, GDP growth does not always equate to social well-being.

For 2027, the market projection for GDP growth fell from 1.31% to 1.20%.

For 2028, the market estimate for economic expansion fell from 1.81% to 1.80%.

In an election year, the government has taken actions to stimulate the economy and reduce the population's debt, which boosts demand for products and services.

The government's strategy, however, makes it difficult to control inflation. The BC has clearly said that a slowdown, that is, a slower rate of economic growth, is part of the strategy to contain inflationary pressures.

The financial market also maintained its projection of interest rate cuts this year, but reduced its projection of a reduction in the Selic. Estimates for the coming years have also been adjusted upward.

Currently, the rate is 13.75% per year — after five cuts this year.

The market estimate for the Selic rate at the end of 2026 rose from 13.25% to 13.50% per year last week, incorporating only one new reduction this year, instead of two.

For the end of 2027, the market projection rose from 11.75% to 12.5% ​​per year.

For the end of 2028, analysts' estimates increased from 10% to 11% per year.

For the end of 2029, analysts' expectations went from 10% to 10.25% per year

The financial market lowered its estimate for the exchange rate at the end of this year from R$5.05 to R$5.34 per dollar.

For the end of 2027, the projection of bank economists rose from R$5.15 to R$5.40 per dollar.

By the end of 2028, market expectations for the dollar went from R$5.20 to R$5.40.

By the end of 2029, it increased from R$5.28 to R$5.45 per dollar.