Brazil softens Selic rate but concerns grow about fiscal stimulus on election year and impact of El Niño
Key takeaways
- Copom said in its policy statement… it reaffirms that the total magnitude of the calibration cycle will be established in light of new information .
- Inflation expectations have risen steadily as President Lula da Silva rolls out measures boosting household spending as he bids for re-election in October.
- Policymakers introduced economic stimulus as an upside risk for inflation in their statement, noting concerns of it weakening some of the usual transmission channels of monetary policy.”
Why this matters: an international story with cross-border implications worth tracking.
Brazil s central bank interest rate-setting committee, Copom, unanimously voted on Wednesday to lower its benchmark Selic rate by 25 basis points to 14.25%, a level last seen in May 2025, but acknowledging a tougher inflation outlook given the risks from election-year fiscal stimulus and the impact of a likely El Nino weather pattern shock.
Copom said in its policy statement… it reaffirms that the total magnitude of the calibration cycle will be established in light of new information . The decision comes as economists scale back expectations for easing this year amid an oil price shock linked to the U.S.-Israeli war with Iran.
Inflation expectations have risen steadily as President Lula da Silva rolls out measures boosting household spending as he bids for re-election in October.