Key facts
- Brazil's central bank is set to cut interest rates for the fourth consecutive meeting on August 5.
- Analysts polled by Reuters expect a quarter-point cut, bringing the Selic rate to 14.00%.
- Persistent inflation concerns and limited fiscal room are preventing faster rate reductions.
- The bank's monetary policy committee (Copom) has previously cut rates by 25 basis points three times this year.
- Some analysts anticipate a fifth consecutive cut in September, while others expect rates to remain on hold.
Brazil's central bank is poised to implement its fourth consecutive interest rate cut on August 5, according to a Reuters poll of economists. Policymakers are expected to reduce the benchmark Selic rate by a quarter percentage point to 14.00%, a move influenced by persistent inflation concerns and the government's limited fiscal flexibility due to high borrowing costs.
The bank's monetary policy committee, known as Copom, has already lowered rates three times this year, bringing them down from a near two-decade high of 15% to the current 14.25%. Despite some recent relief in inflation figures, the rate remains restrictive.
Analysts anticipate that Copom will maintain its cautious communication strategy, avoiding explicit guidance on future policy moves due to market confusion following previous statements referencing long-term inflation trends. The prevailing median estimate suggests the rate will remain at 14.00% until early 2027, with a resumption of gradual easing expected after the October presidential election.
However, opinions are divided on the immediate future, with nearly half of the polled respondents seeing a fifth consecutive 25-basis-point cut in September. This view is supported by some economists who point to an improving inflation outlook, partly due to the waning impact of global oil price shocks. Conversely, other analysts cite concerns over de-anchoring inflation expectations, potential fiscal expansion ahead of the election, and resilient economic activity as reasons for the central bank to hold rates steady this week.