Key facts
- The central bank listed higher oil prices, El Niño-related pressures, the end of the 44-hour work week and a weaker real as the four shocks.
- Policymakers said headline and underlying inflation measures had accelerated above the upper limit of the target range.
- The bank said inflation expectations had moved further away from the 3% target.
- The minutes said the moderation in domestic growth may intensify, according to more recent high-frequency indicators.
- The bank said retail surveys point to a turning point, particularly in segments more sensitive to credit.
- ABC Brasil said in a note it expects the Selic to stay at 13.75% through at least the end of 2027.
Brazil's central bank said in minutes published on November 10, 2026, that the worsening inflation outlook, despite slowing growth, reflected four supply shocks: higher oil prices, El Niño-related pressures, the impact of ending the 44-hour work week and a weaker currency driven by domestic policy uncertainty. The minutes covered last week's meeting, at which policymakers halted an easing cycle and kept the benchmark Selic rate at 13.75%.
The bank said weaker domestic demand and growth projected below potential could help contain the risk of the shocks spilling into broader and more persistent inflation. It also struck a more pessimistic tone on activity, warning that the moderation in domestic growth "may intensify, according to more recent high-frequency indicators." Retail surveys indicate a turning point, particularly in segments more sensitive to credit, the bank said, in a context of restrictive monetary policy that keeps interest rates on non-earmarked credit at very high levels for households and companies.
Policymakers said headline and underlying inflation measures had accelerated and risen above the upper limit of the target range, while inflation expectations had moved further from the 3% target. ABC Brasil said in a note to clients: "Given these signals, we are reiterating our call for the Selic rate to remain at 13.75% through at least the end of 2027."
The outlook deteriorated after President Luiz Inacio Lula da Silva's reelection on October 25 triggered a broad market selloff, according to the report. The real weakened sharply, long-term borrowing costs jumped and stocks fell as investors questioned prospects for fiscal adjustment sufficient to stabilize public debt under the leftist leader, who has also pledged new spending measures. Under Lula's current term, Brazil's gross public debt has risen by more than 10 percentage points to 82.9% of GDP, the report said.