Central Bank hikes further in June

Latest decision: At its June meeting, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) increased its SELIC rate by 25 basis points to 15.00%. Rates have now risen by 450 basis points since Q2 last year.

Inflation concerns drive additional hike: The key driver of the hike was inflation, with both headline and core inflation metrics remaining above the BCB’s 1.5–4.5% tolerance band. High inflation projections, robust economic activity and a tight labor market were further factors at play.

BCB suggests rates will stay on hold: The Bank said it would likely leave rates on hold to assess the impact of the past tightening cycle, but left the door open to more rate hikes if needed to tame inflation. The Consensus among our panelists is currently for the SELIC rate to end this year slightly below the current level, though forecasts could be revised higher going forward as panelists react to the June meeting outcome.

Panelist insight: On the outlook, Itaú Unibanco analysts said: “For now, we expect Copom to keep the Selic at 15.00% until early 2026, when it should begin a 200 basis point easing cycle. An appreciation of the exchange rate could bring forward this move, while a stronger-than-expected economy could lead Copom to postpone the start of the rate-cutting cycle.” EIU analysts said: “Assuming that inflation and inflation expectations gradually converge towards the mid-point of the BCB’s 1.5–4.5% target range, we expect the central bank to begin cutting rates in late 2025 (or early 2026), bringing the Selic rate to a terminal level of about 9% in 2027–28.”

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