Brazil’s central bank cut the Selic rate by 25 basis points to 13.75% on 16 September. The Copom rate-setting committee approved the reduction unanimously. It was the fifth consecutive quarter-point cut and extended the easing delivered since March to 125 basis points. The decision matched the forecast of 48 of 51 economists surveyed by Reuters.
The central bank kept its guidance cautious rather than committing to another reduction. It said the overall scale of the adjustment cycle would depend on new information and the convergence of inflation towards the target. Policymakers identified a gradual moderation in economic activity, particularly in cyclical sectors. They also noted that the labour market remained tight.
ACTIVITY LOST MOMENTUM
Recent data showed Brazil’s economy slowing after household consumption contracted in the second quarter. A central bank activity index also fell by a seasonally adjusted 0.2% in July, exceeding the 0.1% decline forecast in a Reuters poll. Those readings provided evidence of weaker demand as Copom considered whether to continue easing.
Inflation had moderated, but the policy outlook remained constrained by oil prices and expectations above the official 3% target. The central bank raised its 2026 inflation forecast to 5.2% from 5.1% and its 2027 forecast to 3.9% from 3.8%. Its projection for the relevant policy horizon through the first quarter of 2028 remained unchanged at 3.2%.
FURTHER EASING STAYED CONDITIONAL
The reduction left Brazil with a high nominal and real interest-rate setting despite five successive cuts. Copom’s statement did not pre-commit to the size or timing of the next move. That approach preserves room to respond to inflation expectations, external energy costs and the pace of domestic activity.
The next Copom meeting is due in early November, shortly after Brazil’s expected presidential election runoff. A further reduction would depend on incoming activity and inflation data and on whether political uncertainty affects inflation forecasts. The September decision therefore extended the cycle without guaranteeing that the same pace will continue.