Brazil Interest Rate

June cut had been anticipated by markets

Third straight cut in June: At its meeting on 16–17 June, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) reduced its SELIC rate by a further 25 basis points to 14.25%, largely in line with market expectations. The unanimous decision marked the third consecutive quarter-point cut since the BCB began its easing cycle in March. Despite the cut, monetary policy remains restrictive.

Slowing economy supports easing, but inflation calls for caution: The Bank judged that another rate cut was appropriate because previous monetary tightening had started to slow the economy. However, the BCB opted again for a gradual 25 basis points reduction rather than a more aggressive one as inflation continued to rise in May—exceeding the upper bound of the Central Bank’s 1.5–4.5% target—inflation expectations remained above target, and price risks from fiscal stimulus, strong domestic demand and volatile oil prices also argued for a cautious approach.

Elevated uncertainty warrants caution: The BCB provided no explicit forward guidance, reiterating that future rate cuts will depend on incoming data. While it believes current policy is restrictive enough to bring inflation back toward target, elevated uncertainty calls for caution. Still, most of our panelists expect further easing by year-end; our Consensus is for interest rates to end 2026 roughly 60 basis points below current levels. The BCB will reconvene on 3–4 August.

Panelist insight: EIU analysts commented: “The BCB intensified its cautious tone compared with the previous meeting’s minutes and press release, noting heightened concerns about rising inflation and unanchored inflation expectations amid external and domestic risks. We expect the BCB to trim the Selic rate only one more time, by 25 basis points, this year. Thereafter we expect the easing cycle to proceed gradually, with the policy rate not reaching a terminal level in the high single digits until 2029.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Brazilian interest rate projections for the next ten years from a panel of 39 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Brazilian interest rate.

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