Brazil's central bank lowered its benchmark Selic rate by 25 basis points to 14.25% for the third consecutive meeting. Policymakers acknowledged a worsening inflation outlook and raised forecasts, while leaving future policy steps open.
Brazil's central bank is continuing its easing cycle despite rising inflation and inflation expectations, signaling a divergence from the US Federal Reserve's stance and potentially impacting currency and bond markets.
Brazil's central bank continued its monetary easing cycle by cutting its benchmark Selic rate by 25 basis points to 14.25% at its fourth meeting of 2026. The decision was unanimous, but policymakers acknowledged a worsening inflation outlook and raised forecasts, while leaving future policy steps open. Domestically, economic activity appears to be recovering and the labor market shows resilience. However, inflation risks remain higher than usual, with headline inflation accelerating to an annual 4.72% in May. Inflation expectations, as calculated by the bank's Focus survey, remain above target at 5.3% for 2026 and 4.1% for 2027. Economic growth slowed to an annual 1.8% in the first quarter. In the US, Federal Reserve policymakers kept their target rate unchanged for a fourth meeting this year but penciled in a possible rate hike by the end of the year.