Selic cut to 13.75 percent as 2026 GDP forecast drops to 1.8 percent
Banco Central do Brasil has lowered the benchmark Selic rate by 25 basis points to 13.75 percent while cutting its 2026 GDP growth projection to 1.8 percent. The Monetary Policy Committee cited persistent services inflation and unanchored expectations in its quarterly report.
Gradual easing despite lingering price pressures
The Monetary Policy Committee (Copom) reduced the Selic rate by 25 basis points to 13.75 percent at its 281st meeting, continuing the gradual easing cycle that began in March.
Policymakers revised their 2026 gross domestic product growth forecast down to 1.8 percent from 2.0 percent, following a 0.5 percent expansion in the second quarter.
For 2027, the central bank expects output to expand by 1.4 percent.
The baseline scenario projects twelve-month IPCA inflation to rebound to 5.2 percent in the fourth quarter of 2026 before receding to 3.2 percent in the first quarter of 2028, the relevant monetary policy horizon.
Focus survey expectations for 2027 and 2028 rose to 4.30 percent and 3.80 percent.
Tight labor conditions against cyclical cooling
Domestic economic activity shows a cyclical slowdown, with household consumption contracting 0.4 percent in the second quarter.
Yet the labor market remains tight, holding unemployment at a historical low of 5.4 percent through July.
The positive output gap of 0.4 percent is projected to reach minus 0.4 percent by early 2028.
Total credit growth is seen reaching 9.1 percent in 2026 and 8.8 percent in 2027, while the current account deficit narrows to 2.0 percent of GDP.
Meanwhile, severe El Niño risks threaten agricultural output.
Cutting into inflationary crosswinds
Copom is cutting rates into unanchored medium-term expectations, betting that slowing growth will curb price pressures.
This strategy leaves no margin for error if commodity shocks or fiscal slippage spill into wages.
Without stricter fiscal alignment, monetary policy will struggle to anchor expectations at 3 percent.
Source: BCB - Relatório de Política Monetária: 09/2026
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