- Decision
- Raise
- Rate change
- 25 bps
- Selic rate
- 15%
Brazil’s Monetary Policy Committee (Copom) raised the Selic policy rate by 25 bp to 15.00 % per annum, arguing that stubbornly above-target headline and core inflation, de-anchored expectations (Focus survey at 5.2 % for 2025 and 4.5 % for 2026) and still-resilient economic activity and labour market pressures call for a “significantly contractionary” stance to secure convergence of its 3 % target over the relevant horizon, where the Bank projects 2026 IPCA inflation at 3.6 %. This move extends the tightening cycle that saw 100 bp and 50 bp hikes in March and May, which had lifted the rate to 14.75 %. Copom highlights elevated two-sided inflation risks, including persistent expectation de-anchoring, services resilience and currency depreciation on the upside versus potential domestic or global growth slowdowns and softer commodity prices on the downside, while closely watching fiscal developments. It notes a persistently adverse and uncertain global environment tied to U.S. trade and fiscal policies, asset-price volatility and heightened geopolitical tensions, all of which warrant caution for emerging markets. If baseline projections hold, the Committee foresees pausing further hikes to gauge their cumulative effects, but pledges vigilance and readiness to tighten again should inflation risks intensify.
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.