Board members led by Gabriel Galipolo kept the benchmark Selic at 15% for the second straight meeting late on Wednesday, as expected by all economists in a Bloomberg survey. In an accompanying statement, they wrote that the local labour market is showing strength, current inflation levels are above target, and future consumer price expectations are unanchored.
“The Committee will remain vigilant, evaluating whether maintaining the interest rate at its current level for a very prolonged period will be enough to ensure the convergence of inflation to the target,” policymakers wrote. It “emphasises that future monetary policy steps can be adjusted and that it will not hesitate to resume the rate hiking cycle if appropriate.”
Brazilian central bankers are staying on the defensive as consumer price forecasts in Latin America’s largest economy remain above the 3% target through 2028. While annual inflation slowed for the second straight month in August, much of the decline was due to drops in volatile components like electricity and food, rather than a broad improvement. Record-low unemployment and public spending are also underpinning demand, challenging restrictive monetary policy.
What Bloomberg Economics Says
“Brazil’s central bank left its policy rate and message unchanged at its September meeting — the hawkish stance makes sense and is a relatively low-cost strategy to boost credibility as inflation expectations remain unanchored. Monetary policy remained firmly tight, with the ex-ante real policy rate still at 10.1%, twice the 5% level the BCB sees as neutral.” — Adriana Dupita, Brazil and Argentina economist
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Brazil’s decision came hours after Federal Reserve officials lowered their benchmark interest rate by a quarter percentage point and pencilled in two more reductions this year.
2027 Forecast
Economists surveyed by Brazil’s central bank have been gradually lowering their inflation forecasts. They currently see consumer price increases at 4.83% this December, 4.30% at the end of next year and 3.9% at the end of 2027.
In their statement, policymakers kept their own inflation estimate at 3.4% for the first quarter of 2027, which is their relevant horizon for monetary policy. Board members reiterated that both headline and core price increases are running above their goal and that risks are higher than usual.
For Brendan McKenna, an emerging markets economist and currency strategist at Wells Fargo, the key takeaway from the Brazil central bank decision is “how much they are keeping their guard up and defending against inflation.”
“I thought we would have seen a very modest shift in tone that was less hawkish, but that was not the case,” he said. “There is a good amount of upside inflation risks they are contending with, and after last year’s currency sell-off, building credibility is also important.”
While Brazil’s gross domestic product growth slowed in the second quarter from the start of 2025, the job market backdrop remains tight. Unemployment fell more than expected in July, to 5.6%, according to the national statistics agency.
Central bankers doubled down on their warning that the global environment is uncertain and volatile, due to factors such as US policy and the overall outlook in the world’s largest economy. In their statement, policymakers wrote that they are closely monitoring announcements of tariffs on Brazilian goods.
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Policymakers also tweaked the language in the part of the statement when they referenced the maintenance of rates for an extended period, said Leonardo Costa, an economist at ASA. “More flexible wording was introduced, reinforcing caution in an uncertain scenario,” he said.
Brazilian policymakers won’t have conditions to begin cutting rates until next March, when their forecasts will start showing inflation at 3%, according to Fernanda Guardado, who is a former central bank international affairs director.
“The central bank doesn’t want to rock the boat,” said Guardado, who is currently chief economist for Latin America at BNP Paribas. “They want to reinforce the message that they had been giving, which is that rates will remain high for longer.”
