Brazilian Economists Expect Rate Cuts in January

BRASILIA (Reuters) – Brazilian private economists continue to anticipate that the central bank will begin lowering interest rates next January, despite recent indications from policymakers that borrowing costs will remain stable for an extended period to keep inflation within target limits, according to a Monday survey release.

The central bank’s weekly survey indicates that economists expect the benchmark Selic rate to remain at 15% through December, followed by a decrease to 14.75% in January.

Earlier this month, policymakers raised the Selic rate by 25 basis points to the current level, accumulating a total tightening of 450 basis points since September and signaling a pause at the next meeting in late July.

After the increase, the median forecast in the survey shifted towards a 25-basis-point cut in January, projecting the Selic rate to end 2026 at 12.50%. This outlook has remained stable as of Monday.

Diogo Guillen, the central bank’s economic policy director, noted on Friday that discussions about rate cuts are considered premature by policymakers.

The latest survey also revealed that the projected inflation rate for 2025 was reduced for the fifth consecutive week to 5.20%, with forecasts for subsequent years remaining above the official target of 3%, which has a tolerance range of 1.5 points on either side.

In recent remarks, central bank Governor Gabriel Galipolo and Guillen reaffirmed the commitment to achieve a 3% inflation target over the ‘relevant horizon’—the 18-month timeframe influenced by current policy decisions.

Despite the inflation projection of 3.6% in that timeframe, policymakers indicated plans for a rate pause, based on market expectations that the Selic rate would be kept steady at 14.75% until January 2026, which reflects a more dovish approach than previously anticipated.

Galipolo and Guillen also mentioned that inflation is still expected to align with the central bank’s target under alternative, undisclosed rate pathways.