Brazilian economists expect central bank to cut rates in early 2026 despite hawkish signals
The central bank's weekly survey shows economists project the benchmark Selic rate to be held at 15% through December, before falling to 14.75% in January.
Policymakers earlier this month raised the Selic rate by 25 basis points to its current level, bringing the total amount of tightening to 450 basis points since September, and signalled a pause at the next meeting in late July.
Following the hike, the median forecast in the survey shifted to a 25-basis-point cut in January, with the Selic rate projected to end 2026 at 12.50%. That outlook remained unchanged on Monday.
Diogo Guillen, the central bank's economic policy director, emphasized on Friday that policymakers view any rate-cut debate as premature.
The latest survey also showed that the expected inflation rate for 2025 was cut for a fifth straight week to 5.20%, but projections for subsequent years remain unchanged above the 3% official target, which has a 1.5-point tolerance range either side.
In recent speeches, central bank Governor Gabriel Galipolo and Guillen reiterated policymakers' commitment to bringing inflation to the 3% target over the "relevant horizon" - the 18-month period influenced by current policy decisions.
Policymakers have flagged a rate pause despite projecting inflation to be 3.6% over that horizon.
That forecast was based on market expectations that the Selic rate would be held steady at 14.75% until January 2026 - a more dovish path than has materialized.
Galipolo and Guillen added that inflation is still expected to converge to the central bank's target under alternative, undisclosed rate paths.
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