Brazil’s Central Bank holds benchmark interest rate at 15% annually
The decline in inflation and the onset of an economic slowdown led the Brazilian Central Bank to interrupt the cycle of interest rate hikes. The Monetary Policy Committee (Copom) unanimously decided to keep the Selic rate—the economy’s benchmark interest rate—at 15 percent per year.
In a statement, Copom reported that US trade policy has heightened price uncertainty and that, for now, it intends to keep the Selic rate unchanged. However, it did not rule out the possibility of raising the rate again if necessary.
“The committee has been closely monitoring announcements of US trade tariffs on Brazil, reinforcing its cautious stance amid a scenario of heightened uncertainty,” the statement read.
The rate is at its highest level since July 2006, when it stood at 15.25 percent per year. The pause in monetary tightening marks the consolidation of a contractionary monetary policy cycle. From September last year to May this year, the Selic rate was raised seven times.
Inflation
The Selic rate is the Central Bank’s main tool for controlling official inflation, as measured by the Broad National Consumer Price Index (IPCA). In June, the IPCA fell to 0.24 percent, despite pressure from some food items and energy bills. With this result, the index has accumulated a 5.35 percent increase over 12 months, exceeding the upper limit of the continuous inflation target.
Under the new continuous target system, in effect since January, the inflation target set by the National Monetary Council and pursued by the Central Bank is 3 percent, with a tolerance range of 1.5 percentage points in either direction. In other words, the lower limit is 1.5 percent and the upper limit is 4.5 percent.
In the continuous target model, the target is monitored on a monthly basis, considering the accumulated inflation over the previous 12 months.
In its latest Monetary Policy Report, released at the end of June, the Central Bank lowered its IPCA forecast for 2025 to 4.9 percent. However, the estimate may be revised depending on exchange rate fluctuations and inflation trends. The next edition of the report—which replaced the former Inflation Report—is scheduled for release at the end of September.
Market forecasts are more pessimistic. According to the Focus bulletin—a weekly survey of financial institutions released by the Central Bank—official inflation is expected to end the year at 5.09 percent.
