It‘s gonna take time: 2026 Mid-Year Brazil Economic Outlook

Research evidence excerpt

It‘s gonna take time: 2026 Mid-Year Brazil Economic Outlook

Vinicius Moreira (55-11) 4950-3195 Mirella Sampaio (55-11) 4950-3289 Latin America Economic Research J P M O R G A Nvinicius.moreira@jpmorgan.com mirella.sampaio@jpmorgan.com

Banco J.P. Morgan S.A. Banco J.P. Morgan S.A. 13 July 2026

Cassiana Fernandez (55-11) 4950-3369 Gustavo Ribeiro (55-11) 4950-4059

cassiana.fernandez@jpmorgan.com gustavo.ribeiro@jpmorgan.com

Banco J.P. Morgan S.A. Banco J.P. Morgan S.A.

pass-through to domestic fuel prices, owing to government increase the volatility of financial assets, further blurring the

subsidies. outlook. Indeed, following the June meeting, the COPOM

recognized these challenges in its communication. As a result,

A worsening supply outlook associated with El Niño condi- we now expect the BCB to pause the easing cycle after two

tions tends to amplify food price volatility through domestic 25bp cuts at the August and September meetings.

production shocks and distribution constraints. Weather-relat-

ed disruptions can generate persistent and broad-based pres- Fiscal challenges growing every year

sures on food inflation, particularly given its large weight in

To be sure, many countries are grappling with persistent CPI

the CPI basket and its salience for expectations formation.

above target and fiscal challenges. But the case of Brazil

The net upward revision to headline inflation in 2026 is there-

looks different. The augmented role of fiscal policy is illus-

fore driven by a more adverse outlook for food prices, which

trated by the fact that Brazil is among the very few countries

we have revised up to 6.5%, from 5.6% previously. These

where rates are not only higher than pre-pandemic levels but

pressures on the food CPI should cascade into 2027, raising