Copom delivers a third straight 25bp cut while warning election-year stimulus may undermine monetary policy effectiveness.
Brazil’s central bank lowered its benchmark Selic rate by 25 basis points to 14.25%, matching market expectations for a third consecutive cut. The decision was unanimous, but policymakers highlighted fiscal stimulus as a key upside risk to inflation, complicating future easing plans.
Inflation forecasts for 2026 and 2027 were revised higher to 5.2% and 3.7%, respectively, signaling growing concerns over price stability. Analysts now expect only 50 basis points of additional cuts in the coming months, a slower pace than earlier in the cycle.
The BRL remains sensitive to shifts in the easing outlook, particularly if inflation accelerates further. Supply-side pressures, including El Nino weather risks and labor market reforms, add to uncertainty ahead of October’s election.