Brazil: Selic rate kept at 15% for the fourth consecutive time
The Selic rate has stayed unchanged for the past four months
The Monetary Policy Committee (Copom) of Brazil’s Central Bank (BCB) unanimously decided on Wednesday to keep the economy’s base interest rate known as Selic at 15% per annum, in accordiance with market expectations, given the current declining inflation and economic slowdown.
In a statement, the Copom gave no indication of when it might begin to cut interest rates, insisting that the current scenario was marked by great uncertainty, which required caution in monetary policy. Hence, the BCB’s strategy.
The committee believes that the current strategy of maintaining the current interest rate for a prolonged period is appropriate to ensure that inflation converges with the target. The committee emphasizes that it will remain vigilant, that future monetary policy steps may be adjusted, and that, as usual, it will not hesitate to resume the adjustment cycle if it deems it appropriate, the statement read.
It was the fourth consecutive meeting in which the Copom has kept the basic interest rate unchanged. The rate is at its highest level since July 2006, when it stood at 15.25% per annum.
After reaching 10.5% per annum in May last year, the rate began to rise in September 2024. The Selic rate reached 15% per year at the June meeting and has been maintained at that level since then.
The Selic rate is the Central Bank’s main instrument for keeping official inflation under control, as measured by the Broad National Consumer Price Index (IPCA). In November, the IPCA stood at 0.18%, the lowest level for the month since 2018. As a result, the indicator has accumulated a 4.46% increase in 12 months, returning to within the continuous inflation target ceiling.
Under the new continuous target system in effect since January, the inflation target to be pursued by the BCB, as defined by the National Monetary Council, is 3%, with a tolerance interval of 1.5 percentage points up or down. In other words, the lower limit is 1.5% and the upper limit is 4.5%.
In the continuous model, the target is calculated on a monthly basis, considering the accumulated inflation over 12 months. In December 2025, inflation since January of the same year is compared with the target and the tolerance range.
In January 2026, the procedure is to be repeated, with calculations starting in February 2025. Thus, the verification shifts over time and is no longer restricted to the closed index for December of each year.
In the latest Monetary Policy Report, released at the end of September by the Central Bank, the monetary authority lowered its IPCA forecast for 2025 to 4.8%, but the estimate will be revised due to the behavior of the dollar and inflation. The next edition of the document, which replaced the former Inflation Report, will be released later this montth.
Market forecasts are more optimistic. According to the Focus Bulletin, a weekly survey of financial institutions released by the BCB, official inflation is expected to close the year at 4.4%, an improvement from the previous month’s 4.55% projections.
The increase in the Selic rate helps to contain inflation ecause higher interest rates make credit more expensive and discourage production and consumption. On the other hand, higher rates hinder economic growth. In the latest Monetary Policy Report, the Central Bank lowered its growth forecast for the economy in 2025 from 2.1% to 2%.
The market projects slightly better growth. According to the latest edition of the Focus bulletin, economic analysts predict GDP growth of 2.25% in 2025.
The basic interest rate is used in government bond trading in the Special Settlement and Custody System (Selic) and serves as a benchmark for other interest rates in the economy. By adjusting it upward, the Central Bank curbs excess demand that puts pressure on prices, because higher interest rates make credit more expensive and encourage savings.
By reducing the basic interest rate, the Copom makes credit cheaper and encourages production and consumption, but weakens inflation control. To cut the Selic rate, the monetary authority needs to be sure that prices are under control and are not at risk of rising. (Source: Agencia Brasil)