MNI WATCH: Market Divided Over BCB's Decision, Copom To Hold

Market participants are divided over the Central Bank of Brazil’s monetary decision this week, with most expecting the board to hold the official Selic rate at 14.75% on Wednesday, while some see a 25-basis-point hike to 15% as likely.

The BCB has already raised rates for six consecutive meetings, bringing the Selic to its highest level since July 2006.

The Monetary Policy Committee (Copom) increased interest rates by 50 basis points last month to 14.75%, offering no forward guidance for the June decision while remaining data dependent.

FOCUS SURVEY

According to the BCB’s Focus market survey, inflation is expected to end the year at 5.25%, above the upper limit of the 3% target tolerance range, which allows for a maximum of 4.5%. Expectations remain unanchored over longer horizons, with forecasts at 4.50% for 2026, 4.00% for 2027, and 3.85% for 2028.

Analysts expect the Selic rate to remain at 14.75% this year before gradually falling to 12.50% in 2026 and reaching 10% in 2028.

Former Treasury Secretary Carlos Kawall told MNI the BCB left the door open for an additional rate hike in June but has likely ended its tightening cycle and will probably hold the Selic at 14.75% at least through the first quarter of 2026. (See: MNI INTERVIEW: BCB To Hold Rates Steady Until 1Q 2026 - Kawall)

The lack of guidance from the Central Bank for June does not necessarily signal the end of the tightening cycle, former secretary of industry and commerce development at the Ministry of Economy Caio Megale told MNI, adding that the board could raise rates by 25 basis points to 15% at the next meeting. (See: MNI INTERVIEW: Lack Of BCB Guidance Doesn't Mean End Of Cycle)