MNI BCB WATCH:Analysts Split On Cut Size, 25BP Seen After Iran

Analysts are split over the size of the likely rate cut by the Central Bank of Brazil on Wednesday, with a small majority now forecasting a 25-basis-point reduction to 14.75% in the wake of the U.S.-Israeli attack on Iran, while others still anticipate a larger 50bp move.

While higher oil prices could push up inflation, Brazil could benefit from stronger exports if the exchange rate remains well behaved. The real has maintained its strength since the outbreak of conflict, trading this Monday around BRL5.26 to the dollar, stronger than at the last BCB meeting, when it stood at BRL5.35.

The BCB’s Monetary Policy Committee (Copom) held its official Selic rate at 15.00% in January and said it would start the easing cycle at its next meeting if the outlook evolves as expected, without specifying the size of the cut.

BCB CAUTIOUS DUE TO IRAN

Former Treasury Secretary Carlos Kawall told MNI in an interview that the BCB is likely to begin reducing interest rates this week with a 50-basis-point cut to 14.50%, adding that uncertainty around the conflict in Iran could prompt policymakers to proceed cautiously and avoid providing clear guidance on the pace of further easing. (See MNI INTERVIEW: BCB To Cut 50BP Amid Iran Uncertainty - Kawall)

Former economic advisor to the Ministry of Planning and Budget Eduardo Velho also said in an interview that the possibility of a 25-basis-point reduction is gaining traction within the BCB as oil prices rise, though his call remains for a 50bp reduction. (See MNI INTERVIEW: BCB Likely To Cut 50BP Despite Conflict - Velho)

Former secretary of industry and commerce development at the Economy Ministry Caio Megale stressed that though Copom might cut 50 basis points due to an improvement in the inflation outlook, the BCB’s approach to any easing cycle would be cautious. (See MNI INTERVIEW: BCB Likely To Cut 50bps In March - Megale)

According to the BCB’s Focus market survey, inflation is expected to end 2026 at 4.10%, a significant revision from 3.91% last week. For 2027, analysts project 3.80%, and 3.50% from 2028 onward.

IPCA inflation was 3.81% in February, down from 4.44% in January, remaining within the BCB’s 3% central target range, which allows for a deviation of 1.5 percentage points in either direction.