- Decision
- Raise
- Rate change
- 100 bps
- Selic rate
- 14.25%
Brazil’s Monetary Policy Committee (Copom) raised the Selic policy rate by 100 bp to 14.25 % at its March 2025 meeting, citing persistent headline and core inflation above target, a marked rise in medium-term inflation expectations (to 5.7 % for 2025 and 4.5 % for 2026 in the Focus survey) and continued strength in economic activity and the labour market despite early signs of moderation. The decision aims to reinforce convergence of Copom’s inflation projection of 3.9 % for Q3 2026 toward the target amid upside risks that include de-anchored expectations, resilient services inflation and potential currency depreciation, offset by downside risks from a sharper domestic slowdown or softer external inflation. Copom noted that fiscal sustainability perceptions are materially influencing financial conditions, while a challenging global backdrop—marked by uncertainty over US trade policy, tight labour markets in advanced economies and cautious stances by major central banks—requires vigilance from emerging markets. Looking ahead, the Committee signalled a smaller rate increase at the next meeting if conditions evolve as expected but stressed that the ultimate scale of tightening will depend on inflation dynamics, expectations, the output gap and the balance of risks.
Rate evolution
Over the period, the Central Bank of Brazil’s Monetary Policy Committee (Copom) raised the Selic rate by 25 basis points to 15.00% in June 2025, held it there through January 2026, and then cut it in five 25 basis point steps to 13.75% by September 2026, leaving it 100 basis points below where the sequence began. The pause reflected inflation and underlying measures staying above target, deanchored expectations, resilient activity and labor-market pressures despite slower growth, and a cautious response to uncertainty from United States policy, domestic fiscal developments and geopolitics, with inflation risks judged higher than usual on both sides. As inflation and expectations improved late in 2025, Copom shifted from questioning whether a prolonged hold would suffice to judging that strategy appropriate, and in January signalled easing could start at the next meeting if the expected scenario materialised.
Copom then cut five times as prolonged restrictive settings showed transmission to the slowdown in activity, but it continued to flag uncertainty over Middle East conflicts, global financial conditions and monetary policy in some advanced economies. In June 2026, the committee judged the accumulated degree of restriction allowed different rate paths consistent with convergence and that paths ensuring inflation returned to target in the first quarter of 2028 were compatible with smoothing macroeconomic fluctuations, even as first-quarter activity accelerated, the labor market remained resilient, and headline and underlying inflation moved further from target and above its upper bound in the latest reading. After cutting the Selic rate to 14.00% in August as activity moderated and inflation eased, Copom lowered it to 13.75% in September as activity continued to slow while remaining resilient, the labor market stayed tight, and headline and underlying inflation fell below the tolerance interval’s upper limit but remained above target, while deanchored expectations, domestic fiscal developments and elevated two-sided inflation risks with upward asymmetry continued to require caution and an adequately restrictive stance.