Brazil’s central bank starts easing cycle, cuts Selic rate to 14.75%
The decision comes as Brazil combines softer inflation with signs of slower economic growth
Brazil’s central bank on Wednesday cut the Selic benchmark rate from 15% to 14.75% a year, marking the first reduction since May 2024 and the formal start of an easing cycle that policymakers had already flagged. In its statement, the Monetary Policy Committee, or Copom, said the move was consistent with its strategy to bring inflation back to target and noted that the external environment had become “more uncertain” because of the intensification of geopolitical conflicts in the Middle East.
The decision comes as Brazil combines softer inflation with signs of slower economic growth. The Brazilian Institute of Geography and Statistics, IBGE, said the IPCA consumer price index ended 2025 up 4.26%, down from 4.83% in 2024 and within the official tolerance band. The same agency said Brazil’s economy grew 2.3% in 2025, after expanding 3.4% in 2024.
In its statement, Copom warned that volatility in asset prices and commodities calls for additional caution among emerging economies. That language points directly to the rebound in energy prices linked to the Iran war, a particularly sensitive issue for Brazil because, while it is an oil exporter, it still depends on fuel imports, especially diesel. The committee did not rule out further cuts, but made clear that the pace of easing will depend on incoming data.
The inflation backdrop, however, remains mixed. IBGE reported that February inflation stood at 0.70% and that the 12-month rate fell to 3.81%, reinforcing the disinflation narrative. But the same institute also showed in March that fuels were again pushing prices higher, amid refinery and transportation cost increases.
Market expectations remain cautious. The latest Focus survey published by the central bank showed a median inflation forecast of 3.99% for 2026, alongside growth expectations of 1.82% and a path of gradual interest-rate declines. At the same time, Copom had said in January that its own inflation projections for 2026 and the third quarter of 2027 stood at 3.4% and 3.2%, respectively.
The quarter-point cut therefore opens a new phase for Brazilian monetary policy, but not a sharp turn. The central bank’s message was that easing can begin because disinflation and weaker activity allow it, though under close watch from a more unstable international environment and from a fuel market that remains a source of risk for domestic prices.
