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Economy April 29, 2026 05:49 PM

Brazil's Central Bank Lowers Selic by 25 Basis Points, Holds Off on Forward Guidance

Copom unanimously trims policy rate to 14.50% for a second meeting, tying future moves to developments in the Middle East

By Hana Yamamoto
Brazil's Central Bank Lowers Selic by 25 Basis Points, Holds Off on Forward Guidance

Brazil's monetary authority reduced its benchmark Selic rate by 25 basis points to 14.50% in a unanimous decision, marking a second consecutive easing move. Policymakers refrained from providing forward guidance and said future rate adjustments will depend on new information about the economic effects of the U.S.-Israel war against Iran. The bank cited room to ease after a prolonged period of highly restrictive policy and noted that a stronger real and wide interest-rate differentials have helped moderate inflation pressures.

Key Points

  • Copom unanimously cut the Selic rate by 25 basis points to 14.50%, the second consecutive reduction following March's initial cut.
  • Policymakers provided no forward guidance and said future rate adjustments will depend on new information about the economic effects of the U.S.-Israel war against Iran.
  • Officials noted that a stronger Brazilian real, supported by a wide interest-rate differential with advanced economies, has helped moderate inflation by lowering import costs.

Brazil's policy committee approved a 25 basis-point reduction in the benchmark Selic rate to 14.50% at its latest meeting, marking the second straight session in which officials have trimmed interest rates. The decision was unanimous and came without forward guidance; the central bank said its next moves will be conditioned on fresh information about the economic impact of the U.S.-Israel war against Iran.

Copom, the central bank's rate-setting committee, lowered the Selic after initiating the easing cycle in March with an identical 25 basis-point cut. The committee's vote matched market expectations: 31 out of 35 economists in a Reuters survey had forecast a similar move.

In its policy statement, the committee underscored the need for restraint and prudence in calibrating monetary policy. "Future steps of interest rate calibration can incorporate new information about the depth and duration of the conflicts in the Middle East," they wrote in the announcement.

Officials have said the decision to start easing was supported by what they described as an extremely restrictive policy stance. The central bank had kept the Selic at near a 20-year high since last July as part of its effort to steer inflation toward a 3% target, with a tolerance band of plus or minus 1.5 percentage points.

Since the March meeting, the Brazilian real has appreciated. Policymakers linked that currency strength in part to Brazil's wide interest-rate differential with advanced economies, saying the stronger real has helped to temper inflation pressures by making imports cheaper.

Context and implications

The move continues the cautious easing sequence started this year while leaving the timing and scale of subsequent cuts open to incoming data, particularly information related to the geopolitical tensions cited by the committee. The statement reiterates the bank's objective of returning inflation to its target range and highlights the interplay between exchange-rate developments and domestic price pressures.

Observers and market participants will watch incoming economic releases and any changes in the geopolitical situation that the committee identified as a determinant of future policy steps.

Risks

  • Uncertainty around the depth and duration of the conflicts in the Middle East, which the central bank said could shape future monetary policy decisions - this poses a risk to markets sensitive to geopolitical developments.
  • The need to keep inflation on a trajectory toward the 3% target (with a plus-or-minus 1.5 percentage point tolerance) creates uncertainty over the pace and scope of further rate cuts if inflation pressures persist.
  • Exchange-rate movements remain a source of uncertainty: while a stronger real has eased imported price pressures, changes in the currency or interest-rate differentials could alter that dynamic and affect inflation.

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