Brazil: Central Bank cuts rates again in April
BCB reduces rates cautiously: At its meeting on 28–29 April, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) reduced its SELIC rate by 25 basis points to 14.50%. The cut, which had been priced in by markets, was a unanimous decision and marked the second consecutive 25 basis point reduction since the BCB initiated its current loosening cycle last month.
Monetary policy remains restrictive: The Bank assessed a cut was still called for, as the cooling of GDP growth indicated the transmission of prolonged elevated rates to the real economy. Moreover, monetary policy remains restrictive despite recent cuts. The renewed rate reduction came despite the inflation outlook deteriorating: The BCB raised its 2026 headline inflation forecast to 4.6% from 3.9% at its prior meeting in March, while the forecast for Q4 2027—the Bank’s current relevant horizon—stood at 3.5%, both above the 3.0% midpoint of the Central Bank’s 1.5–4.5% tolerance range.
Consensus turns more hawkish: The BCB refrained from providing explicit forward guidance regarding future interest rate changes, but emphasized that both current and expected inflation are unanchored and trending further above the 3.0% target and that uncertainty around these projections is elevated. Currently, all of our panelists still see room for further policy easing this year, but our Consensus has turned more hawkish over the last month; if the economy performs better than anticipated and the war in the Middle East is prolonged, additional rate cuts could be taken off the table. The Bank will reconvene on 16–17 June.