Focus: market reduces projections for dollar and GDP from 2026 and see Selic to 11.75% in 2027

The headline reports that the market, as reflected in the Focus survey of Brazilian analysts, has lowered its projections for the US dollar exchange rate and Brazil's GDP growth starting in 2026, while also expecting the Selic benchmark interest rate to reach 11.75% in 2027. The transmission runs through the interest-rate channel: a weaker growth outlook combined with a higher expected policy rate signals that the Central Bank is anticipated to keep monetary policy restrictive for longer, which tightens domestic financial conditions and weighs on credit-sensitive activity. Domestic fixed-income instruments tied to the Selic, particularly DI futures and long-dated government bonds, are the most directly exposed, as their pricing reflects the path of expected policy rates. Equities and the real are exposed through the growth and capital-flow channels, since lower GDP expectations reduce corporate earnings forecasts while the revised dollar projection shapes expectations for import prices and inflation pass-through. Traders should watch the next IPCA inflation release and the Central Bank's Copom statement, as any shift in the inflation trajectory would determine whether the expected

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