MNI BCB WATCH: Copom Expected To Hold At 15%, Eyes On Next Cut

The Central Bank of Brazil is expected to hold its official Selic rate at 15% on Wednesday, as previously signaled, leaving analysts to watch for clues as to when the board might begin easing against a backdrop of more benign inflation and expectations data. 

In recent weeks, inflation forecasts have fallen over all projected horizons. According to the BCB’s Focus market survey, inflation is expected to end the year at 4.83%, down from 4.95% four weeks earlier. For 2026, analysts now project 4.30% (from 4.40%), 3.90% for 2027 (from 4.00%), and 3.70% for 2028 (from 3.80%).

Along with improved current inflation data, this has pushed back expectations for potential rate cuts, with some seeing room for a reduction in December.

The decision will come amid diplomatic tensions with the U.S., after President Donald Trump imposed 50% tariffs on Brazil in connection with the trial of former President Jair Bolsonaro, which concluded with a sentence of more than 27 years in prison.

CUT IS COMING

Former deputy governor for economic policy Sergio Werlang told MNI in an interview that the BCB is likely to hold rates until December, when the board is likely to begin an easing cycle with a 25-basis-point cut. He noted that economic activity is already slowing due to monetary policy tightening. (See MNI INTERVIEW: BCB Likely To Start Cuts In December - Werlang)

But the former head of the BCB’s department of economic research, Marcelo Kfoury, said the board might hold rates until next year, with a small possibility of a December cut if the outlook and especially inflation expectations continue to improve. (See MNI INTERVIEW: BCB Hold Until 2026, Early Cut Possible -Kfoury)

Last month the Monetary Policy Committee (Copom) kept its interest rate on hold, saying that the "interruption of the rate-hiking cycle" will continue in further meetings to allow it time to "examine its yet-to-be-seen cumulative impacts."

INFLATION DATA

IPCA inflation was 5.13% in August versus the 5.09% consensus and down from 5.23% in July, Brazilian Institute of Geography and Statistics (IBGE) data showed Wednesday.

The data has remained above the upper limit of the BCB's 3% target range, which allows a 1.5-percentage-point deviation in either direction.

On a monthly basis, inflation turned negative, with prices declining 0.11%, compared with an increase of 0.24% in the previous month. It was the first deflation since August 2024.

The decline in prices was driven mainly by energy costs.