Brazil: Selic to remain on hold into 2027 – Societe Generale

The Selic rate remains at 13.75% after Banco Central do Brasil (BCB) suspended its five-meeting easing cycle in response to post-election volatility and fiscal uncertainty, Societe Generale reports. Economist Dev Ashish now forecasts no change in the policy rate through 2Q27. He expects cuts to resume only after inflation expectations stabilise and the fiscal outlook becomes clearer, implying around 100 bps of easing and a Selic rate of 12.75% by end-2027.

Rates stay high as restoring credibility takes priority

"Elsewhere, the BCB left the Selic rate unchanged at 13.75% yesterday, bringing its five-meeting easing cycle to a halt in response to post-election market volatility and fiscal uncertainty."

"Policymakers acknowledged the more challenging inflation outlook but stopped short of validating market expectations for renewed tightening, opting instead to preserve flexibility."

"Despite weakening growth and still-restrictive real rates, the message was clear: restoring policy credibility takes priority."

"Our economist Dev Ashish now expects Selic rate to remain unchanged through 2Q27, with easing resuming only after inflation expectations stabilise and fiscal visibility improves, leaving scope for around 100bp of cuts in 2027 and an end-2027 Selic rate of 12.75%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)