MercoPress. South Atlantic News Agency

Brazil central bank cuts Selic interest rate 25 points to 14.50%

The cut anticipated by markets, marked the second consecutive 25 basis point cut since the Central Bank initiated its current loosening cycle last month.

Brazil’s Central Bank following its two days meeting 28–29 April of the Monetary Policy Committee (COPOM) announced the reduction of its SELIC rate by 25 basis points to 14.50%.

The cut, which had been anticipated by markets, resulted in a unanimous decision and marked the second consecutive 25 basis point cut since the Central Bank initiated its current loosening cycle last month.

However the central bank assessed a cut was necessary as the cooling of GDP growth indicated the transmission of prolonged elevated rates to the real economy. Moreover, monetary policy remains restrictive despite recent cuts. The renewed rate reduction came despite the inflation outlook deteriorating, as confirmed by the weekly Focus survey, and the Central Bank raised its 2026 headline inflation forecast to 4.6% from 3.9% at its prior meeting in March. Likewise the forecast for Q4 2027—the Bank’s current relevant horizon—stood at 3.5%, both above the 3.0% midpoint of the Central Bank’s 1.5–4.5% tolerance range.

The Central Bank emphasized that both current and expected inflation are unanchored and trending further above the 3.0% target and that uncertainty around these projections is elevated. Currently, all Focus panelists still see room for further policy easing this year, but consensus has turned more hawkish over the last month. In effect if the economy performs better than anticipated and the war in the Middle East is prolonged, additional rate cuts could be suspended. The Central Bank will reconvene on 16–17 June.

With opinion polls not necessarily favoring President Lula’s reelection bid later this year, and the opposition strengthening the overall situation is considered fragile. President Lula’s meeting with Trump, and his cyclothymic condition, at the White House is another political factor to take into account. The Bank will reconvene on 16–17 June.