Brazil's central bank is widely expected to approve a third consecutive 25-basis-point reduction in its policy rate at its meeting on Wednesday, according to a recent poll of economists conducted between June 12 and June 15. The anticipated move would lower the Selic rate to 14.25% from 14.50%.
Forty-one of the 45 economists surveyed forecast a quarter-point reduction at the meeting; four respondents anticipated no change. The monetary policy committee, known as Copom, initiated a measured easing cycle in March after maintaining the cost of borrowing at 15% through the second half of 2025.
Market participants and analysts expect the committee to keep a cautious tone in its post-meeting statement, reflecting ongoing pressures on consumer prices. Joao Savignon, head of macroeconomic research at Kinitro Capital, noted that Copom's communications between meetings point to a continuation of rate reductions at a similar pace, while adding that the overall planning of the cycle has become more uncertain.
Annual inflation in Brazil rose to 4.72% in May from 4.39% in April, moving further above the central bank's target of 3.0% with a tolerance band of 1.5 percentage points in either direction. Analysts highlighted that an El Nino weather pattern represents an additional potential risk to inflation dynamics, according to a report by BTG Pactual economists.
"When we consider some additional unanchoring of expectations ... the scope for interest rate cuts this year becomes virtually nil," the BTG Pactual economists wrote.
On forward guidance, most poll respondents also signaled expectations for continued, measured reductions. Of the 31 economists who answered an additional question on the committee's subsequent move, 19 predicted another 25-basis-point cut at the August meeting.
Median projections from the poll's quarterly forecasts indicate the Selic would finish 2026 at 13.75% and end 2027 at 12.00%. Those median estimates align closely with consensus readings from economists surveyed in a separate weekly central bank poll.
Analysts warn that Copom is likely to balance an easing path against inflationary pressures, repeating cautious language in communications while unwinding borrowing costs that were close to two-decade highs just months earlier. The central bank's approach reflects a gradual recalibration rather than an aggressive pivot.
What this means for markets and the economy
- Fixed-income markets and sovereign yield curves will be sensitive to the committee's forward guidance on the pace of future cuts.
- Currency and banking sectors are likely to react to both the immediate cut and the medium-term forecast path for the Selic rate.
- Persistent inflation and weather-related agricultural impacts tied to El Nino could influence pricing across consumer and commodity-sensitive sectors.