Brasilia, July 16, 2026 (Lusa) - The Brazilian Government has raised its forecast for inflation in 2026 from 4.5% to 5.1%, citing pressure from food prices, the impact of the conflict in the Middle East on oil prices, and the risk of a more intense El Niño.
According to the Ministry of Finance’s “Macro-Fiscal Bulletin of the Secretariat for Economic Policy”, recent shocks to oil and other commodity prices continue to put pressure on Brazilian consumer prices.
In the document, the ministry notes that food inflation remained the main driver of pressure, fuelled by rising prices for fresh produce, milk, rice and beans.
The economic team also highlights persistent inflation in services and industrial goods, despite expectations of a gradual slowdown over the second half of this year.
According to the Ministry of Finance, a potential worsening of the El Niño climate phenomenon could put further pressure on food prices later this year and pose an additional risk to the 2027 harvest.
At a press conference, the Secretary for Economic Policy, Débora Freire, explained that “the main risk is hydrological”, which could lead to higher electricity prices in the country.
Freire said that, to date, the Ministry of Finance has not discussed measures to mitigate the effects of El Niño in the country.
According to the bulletin, the effects of the war in the Middle East continue to influence inflation projections, even following a temporary fall in international oil prices during the ceasefire between the United States and Iran.
The document notes, however, that the breakdown of the ceasefire, after the cut-off date for the projections, has once again heightened the risks to energy prices.
“However, it is still too early to say that prices have stabilised: the ceasefire remains fragile, and its breakdown, which occurred after the cut-off date for this bulletin, constitutes an upside risk not factored into the projections,” the Ministry of Finance stated.
The economic team considers that the oil shock has already had indirect effects on Brazilian inflation, particularly on the prices of services and industrial goods, through increased production and transport costs.
As factors helping to contain inflation, the bulletin cites the maintenance of the base interest rate at a restrictive level, the slowdown in economic activity and measures to limit the passing on of fuel price rises to consumers The bulletin estimates that the macroeconomic impact of the increase in tariffs imposed by the United States on Brazilian products is likely to be limited.
The tariff measures announced by Washington in June 2026, which are still pending approval, provide for exemptions for various products, which should keep the overall impact on the Brazilian economy limited.
The document highlights the measures adopted by the Government since last year to expand credit, liquidity and market diversification for the most exposed sectors.
According to the bulletin, the US market accounted for around 11% of Brazilian exports in 2025, equivalent to less than 2% of GDP prior to the tariff shock.
The economic team’s assessment is that redirecting part of sales to other destinations has offset a significant portion of the losses.
With regard to GDP, the team has maintained its growth forecast of 2.3% for the Brazilian economy in 2026, but anticipates a slowdown in activity in the second quarter following the strong performance recorded at the start of the year.
The slowdown is attributed mainly to the end of the boost provided by the record soya harvest, which boosted agricultural performance at the start of the year.
Industry is also expected to lose momentum, slowing from 1.2% to 0.8% growth, reflecting reduced dynamism in the extractive industries and construction.
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