Central Bank kicks off long-awaited loosening cycle in March

First rate cut in nearly two years is conservative: At its meeting on 17–18 March, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) cut its SELIC rate to 14.75% from 15.00%—its highest level since July 2006 and where it had been since last June. The reduction, which was by unanimous decision, was the first since May 2024 and had largely been anticipated by markets as the BCB stuck to its forward guidance from the prior meeting.

Middle East war stokes inflation fears: The Central Bank favored a cut instead of another hold as economic indicators had behaved as expected, with both GDP growth and inflation cooling recently and pointing to a proper transmission of a prolonged tight monetary policy stance to the real economy. That said, extreme uncertainty triggered by the outbreak of the war in the Middle East at the end of February led to a more conservative approach of a smaller-than-expected interest rate reduction. Turning to the inflation outlook, the BCB raised its 2026 headline inflation forecast to 3.9% from 3.4% at its last meeting in January, while the forecast for Q3 2027—the Bank’s current relevant horizon—stood at 3.3%, both remaining within the Bank’s 1.5–4.5% target band but above the 3.0% midpoint.

Heightened uncertainty clouds outlook: The Central Bank did not provide specific forward guidance regarding future decisions; that said, it noted that uncertainty is higher than usual, inflation expectations are still unanchored, and inflation projections remain above the 3% target. Our Consensus is for the BCB to reduce its SELIC rate by slightly over 200 basis points from its current level this year. The Bank will reconvene on 28–29 April.

Panelist insight: Reflecting on future Central Bank movements, analysts at the EIU noted: “A major risk stems from the fallout of the Iran war, which could prompt the central bank to proceed more cautiously with monetary easing than we expect. This will depend largely on the duration of the conflict and the persistence of elevated oil prices.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Brazilian interest rate projections for the next ten years from a panel of 37 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Brazilian interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Brazilian interest rate projections.

Want to get access to the full dataset of Brazilian interest rate forecasts? Send an email to info@focus-economics.com.