Brazil Central Bank Cuts Selic to 13.75%

Brazil’s central bank cut its benchmark interest rate by 25 bps to 13.75% at its September meeting, in line with market expectations. The bank noted that the external environment remains uncertain due to the lack of clarity surrounding armed conflicts in the Middle East and uncertainty over monetary policy in some advanced economies. Domestically, indicators released since the previous meeting point to a gradual moderation in economic activity, particularly in more cyclical sectors, although activity remains resilient and the labor market remains tight. Recent data show that headline inflation and the average of underlying measures have slowed, standing below the upper bound of the tolerance interval but still above the target. The Copom reiterated that the current scenario, marked by significantly higher uncertainty, deanchored inflation expectations, and elevated risks around the baseline scenario, calls for caution.

Brazil's central bank cut its benchmark interest rate by 25 basis points to 14.00% at its August meeting, in line with market expectations. The decision reflects a cautious approach amid heightened global uncertainty stemming from Middle East conflicts and uncertainty over monetary policy in advanced economies. Domestically, the central bank noted that economic activity continues to moderate gradually while remaining resilient, supported by a strong labor market. Headline inflation has eased but remains above the target range, while core inflation has slowed to slightly below the upper limit of the target band. Inflation expectations remain elevated, with the Focus survey projecting inflation at 5.0% in 2026 and 4.2% in 2027. The Copom reiterated that inflation risks remain skewed to the upside and said future policy decisions will depend on incoming economic data to ensure inflation converges to target.

Brazil's central bank cut its benchmark rate by 25 basis points to 14.25% at its June meeting, in line with market expectations and marking a third straight quarter-point rate cut. Policymakers said the decision was taken amid heightened uncertainty and aims to support economic activity without compromising their commitment to price stability. The central bank highlighted persistent inflationary pressures despite easing energy costs following the interim Iran-US peace agreement. Annual inflation accelerated to 4.72% in May, remaining above the target range, while inflation expectations for 2026 and 2027 stayed elevated at 5.3% and 4.1%, respectively. At the same time, domestic economic activity remained resilient, supported by a strong labor market, with GDP expanding 1.1% in the first quarter and the central bank’s activity index rising 0.51% in April. The Copom emphasized that risks to inflation remain elevated and that future policy decisions will depend on incoming economic data.