Brazil’s central bank is likely to keep its base Selic interest rate on hold at 15.% on July 30, keeping its tightest monetary stance in more than 20 years unchanged in the face of easing inflation expectations seen recently, as per a Reuters report.
At least 35 analysts polled by Reuters from July 21 – 25 expect the rate to remain unchanged after the bank surprised the market with a 25-basis-point hike at its previous meeting.
It is expected that the monetary policy committee of the Central Bank (Copom) will once again reiterate the signal of a “very long pause” in the sequence of monetary tightening.
That position has continued even with the cumulative 450 basis points of rate hikes that began in August.
That committee is sitting on hold while the impact of that rate hike blitz trickles through the economy.
Inflation expectations show tentative progress
The market sentiment has changed slightly after the recent data.
Economists in a weekly survey by Banco Central do Brasil (BCB) cut their inflation outlook for 2026 for the first time in more than two months.
The consensus forecast for inflation in 2026 now points to 4.45%, a decrease of 5 basis points and slightly within BCB’s target range of 3.0% ±1.5 percentage points.
A separate Reuters poll predicted that the consensus estimate for next year’s inflation would fall to 4.4%, down from 4.5% in April.
While this softening is a welcome sign, it is still far from the BCB (Brazilian Central Bank) target, suggesting that the underlying inflation dynamics are still deeply rooted.
Elsewhere, Brazil’s top activity index fell in May, underscoring the central bank’s perception that the economy is slowing orderly.
The outlook points to future rate cuts
While the Selic rate is expected to remain unchanged for now, market participants are increasingly confident that the Central Bank of Brazil will begin cutting interest rates in the coming months.
All 30 analysts who responded to a supplementary question in the latest survey predicted that an easing cycle would start either by late 2025 or early 2026.
Of those, seven anticipate the first cut in December, eight in January, and another seven by March.
The rest pointed to later dates.
Among the 29 analysts who forecast the size of the initial move, 17 expect a 50-basis-point reduction, while 12 foresee a smaller 25-basis-point cut.
The emerging consensus suggests growing optimism that monetary policy is gradually containing inflation without triggering a sharp slowdown.
Still, officials remain cautious about signalling victory too early.
Copom still wary of inflation risks
Overt signs of recovery are appearing, but Copom is expected to maintain a cautious tone in its July announcement.
The bank is also likely to flag ongoing risks from Brazil’s difficult fiscal outlook and possible external shocks, such as new US tariffs.
Copom’s decision may also be influenced by the uncertainty regarding the depth and duration of the economic deceleration.
Anxiety over anchoring medium-term inflation expectations remains, implying any relaxation of policy will be slow-moving and dependent on an ongoing improvement in the macro backdrop.
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