Scenario Revision – Outlook for 2025
In this Special Report, we present our expectations for the macroeconomic scenario in 2025. Overall, we recognize that the prospective scenario appears more challenging, both externally and domestically, resulting in a more depreciated exchange rate, higher inflation, more restrictive monetary policy, and a slowdown in local economic activity.
Given the current conjuncture of economic indicators in the United States, which include a still-solid labor market and a slowdown in the disinflation process, we have adjusted our 2025 US interest rate scenario to just one 25-point cut in June. Thus, we believe the Fed Funds rate will end 2025 at 4.25% and 2026 at 3.75%.
We have revised our 2025 exchange rate expectation to R$ 6.10 (from R$ 5.90), partly explained by the worsening domestic risk premium (greater fiscal policy uncertainty) and a more adverse external environment – which in turn led the DXY to even higher levels (revised from 106 to 108).
Accordingly, we have revised our 2025 IPCA forecast to 4.8% (from 4.2%; BCB: 4.5%; Focus: 4.99%), considering the inertia effect mainly from regulated prices and services, as well as exchange rate pass-through affecting industrialized food and industrial goods – in an environment of heated activity and a positive output gap.
In this context, we expect a terminal interest rate of 15.0% (from 14.5%), with two 100 bps hikes already signaled by the BC in the meetings on January 29 and March 19, but now with an additional +50 bps hike (from +25 bps) on May 7 and +25 bps (from 0 bps) on June 18, maintaining the 15% level throughout 2025.
Reflecting the effects of a more restrictive monetary policy, we expect Brazilian economic growth to reach 1.8% in 2025. The figure reflects lower growth in investment and household consumption breakdowns, reversing the constructive dynamic seen in 2024 due to higher credit costs.
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