MNI BCB Review - July 2025: Rates Unchanged, Guidance Hawkish

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Executive summary:

• The Copom unanimously decided to keep the Selic rate unchanged at 15.00%.
• The statement noted that heightened uncertainty requires a cautious stance, with hawkish guidance for the most part unchanged compared to June.
• Analysts expect the Copom to remain on hold until late-2025 at the very least, with most forecasting the start of the easing cycle in early-2026 but a minority still seeing scope for a rate cut before year-end. 

The Copom statement retained a hawkish bias, describing its decision as “a continuation of the interruption of the rate hiking cycle” which provides it with time to evaluate whether the current interest rate level – assuming it remains stable for a “very prolonged period” – will be enough to ensure the convergence of inflation to target. While the Copom stated that it "will not hesitate to resume the rate-hiking cycle if appropriate," the use of the word "interruption" instead of "pause" suggests an end to the cycle, implying that, after holding rates steady for a while, the most likely next move would be a cut rather than a hike.