Central Bank leaves rates unchanged in January

Central Bank holds fire again: At its meeting on 27–28 January, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) maintained its SELIC rate at 15.00%—the highest level since July 2006—for a fifth consecutive meeting. The hold, which was once again unanimous, had largely been priced in by markets. It followed 450 basis points of rate increases in September 2024–June 2025.

Above-target inflation and inflation expectations delay easing cycle: The Central Bank favored another hold instead of an interest rate reduction due to inflation and inflation expectations both remaining above target, risks to inflation, and heightened geopolitical tensions. Regarding price pressures, both headline and underlying inflation have cooled in recent months but remain above the BCB’s 1.5–4.5% tolerance range. Moreover, inflation expectations for the coming years have stayed above the midpoint of the target band, despite marginally decreasing to 3.4% for 2026 as a whole from those recorded at the prior meeting in December. Turning to uncertainty, the Bank stated it continued to monitor geopolitical tensions and changes in U.S. policies—namely tariffs on Brazilian goods—and their impact on Brazil’s economy. Domestic fiscal policy was cited as another source of uncertainty. Meanwhile, the BCB noted that while economic activity growth has moderated as expected, the labor market remains resilient, dissuading it from a rate cut.

Easing cycle could begin in March: The Central Bank’s forward guidance stated that, if the BCB’s scenario materializes, it would begin its easing cycle when it reconvenes next on 17–18 March. This view is shared by all our panelists; our Consensus is for the BCB to kick off its loosening cycle with a 50 basis points cut at its next meeting. Overall in 2026, our Consensus is for the Bank to reduce the SELIC rate by around 275 basis points from its current level.

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