Brazilian Economists Expect Central Bank to Cut Rates in Early 2026 Despite Hawkish Signals

• Brazilian private economists still expect the central bank to start cutting interest rates next January, even after policymakers reinforced guidance that borrowing costs will remain steady for a "very prolonged" period to anchor inflation to the target, according to a survey released on Monday, June 30, 2025.
• The central bank's weekly survey shows economists project the benchmark Selic rate to be held at 15% through December, before falling to 14.75% in January.
• Policymakers earlier this month raised the Selic rate by 25 basis points (bps) to its current level, bringing the total amount of tightening to 450bps since September, and signalled a pause at the next meeting in late July. Following the hike, the median forecast in the survey shifted to a 25-basis-point cut in January, with the Selic rate projected to end 2026 at 12.50%. That outlook remained unchanged on Monday.
• The latest survey also showed that the expected inflation rate for 2025 was cut for a fifth straight week to 5.20%, but projections for subsequent years remain unchanged above the 3% official target, which has a 1.5-point tolerance range on either side.
• In recent speeches, central bank Governor Gabriel Galipolo and Guillen reiterated policymakers' commitment to bringing inflation to the 3% target over the "relevant horizon" - the 18-month period influenced by current policy decisions. Policymakers have flagged a rate pause despite projecting inflation to be 3.6% over that horizon. That forecast was based on market expectations that the Selic rate would be held steady at 14.75% until January 2026 - a more dovish path than has materialised. Galipolo and Guillen added that inflation is still expected to converge to the central bank's target under alternative, undisclosed rate paths.

(Source: Reuters)