Banco Central do Brasil's Monetary Policy Committee, Copom, lowered the Selic benchmark rate by 25 basis points to 14.00% per annum on Wednesday, extending a cautious easing cycle. The decision, published on the central bank's website, marked the fourth consecutive rate cut since Copom began lowering the Selic from 15.00% in March.
The move was in line with a Reuters poll published on 3 August, which had forecast a fourth straight cut. Copom took the rate down from 14.25% and said the decision is compatible with the strategy of bringing inflation to around the target over the relevant horizon.
RISKS TO INFLATION STILL ELEVATED
Despite the cut, Copom struck a cautious tone in its communiqué, emphasising that risks to the inflation outlook remain elevated. Among upside risks it cited a more prolonged de-anchoring of inflation expectations, greater-than-projected resilience in services inflation and a policy mix with a bigger inflationary impact, for example through a persistently weaker exchange rate, and it said it continues to monitor how domestic fiscal policy developments affect monetary policy and financial assets.
The Committee said it will keep monitoring the scenario so as to maintain adequate restriction to ensure the convergence of inflation to the target. It reaffirmed that the total magnitude of the calibration cycle will be set in light of new information.
Reuters reported that a September rate cut remained in play.
FOURTH CONSECUTIVE STEP DOWN
Wednesday's decision takes cumulative reductions in the current cycle to 100 basis points, from 15.00% to 14.00%.
In its reference scenario Copom projects inflation of 3.2% for the first quarter of 2028, the current relevant horizon, while Focus survey expectations for 2026 and 2027 remain above target at 5.0% and 4.2%.
The minutes of the meeting are due to be released next week, on 11 August.
The next Copom meeting is scheduled for 15 and 16 September.
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