- Decision
- Lower
- Rate change
- 25 bps
- selic rate
- 14.25%
The Central Bank of Brazil’s Monetary Policy Committee (Copom) cut the Selic rate to 14.25% per year in June 2026, saying inflation projections have moved further away from target over the relevant horizon even as uncertainty has risen markedly, while the prolonged period of restrictive rates has shown evidence of slowing activity and allows different interest-rate paths consistent with disinflation. Copom said current conditions justify continuing its calibration cycle, with the total magnitude of that cycle to be determined by incoming information to ensure inflation converges to target. Domestically, activity accelerated in the first quarter, with cyclical sectors regaining importance and the labor market still resilient, although current indicators remain consistent with a deceleration over 2026; headline inflation and underlying measures accelerated further and exceeded the upper limit of the target range in the latest reading. Focus survey inflation expectations for 2026 and 2027 stood at 5.30% and 4.10%, respectively, while Copom’s reference-scenario projection for the Broad Consumer Price Index (IPCA) was 3.7% in the fourth quarter of 2027. Externally, the committee said uncertainty remains high because of unresolved terms for ending armed conflicts in the Middle East and the effects already seen on global financial conditions, requiring caution from emerging economies amid higher volatility in asset and commodity prices. Copom also cited upside risks from de-anchored expectations, oil-related and climate-related supply shocks, persistent services inflation, a weaker exchange rate and stronger demand, while reiterating a calm and cautious approach to policy amid heightened uncertainty.
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.