Brazil’s economy shows clear signs of losing momentum heading into Q3 2026, with restrictive monetary policy at the core. The central bank held the Selic rate at 13.75% in November amid persistent inflation and elevated expectations, curbing consumption, investment, and credit while fiscal uncertainty adds pressure through tighter financial conditions. Q2 QoQ growth already slowed to 0.5% from 1.1%, and recent data on industrial output, business confidence, and retail sales point to further softening. Market-implied odds reflect this closely contested downside tilt, with roughly 77% probability priced into contraction ranges versus just 20% for flat or modest positive prints. The December 2 IBGE release will resolve the contract, with any last-minute activity data potentially shifting the final trader consensus.