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Investing.com -- Brazil’s central bank kept its benchmark interest rate unchanged at 15.0% on Thursday, in a unanimous decision that aligns with market expectations and suggests the end of its hiking cycle.
The Monetary Policy Committee maintained a hawkish tone in its statement, likely aiming to anchor the local yield curve and discourage premature market pricing of rate cuts.
The central bank acknowledged the impact of US tariffs on Brazil, noting these increase uncertainty for the domestic economic outlook. Despite this recognition, the bank’s overall assessment of risks remained unchanged from its previous statement.
While noting some moderation in economic activity, the committee described the labor market as remaining "dynamic."
The bank’s inflation forecasts for 2025 and 2026 held steady at 4.9% and 3.6% respectively, below the latest weekly market projections of 5.09% and 4.44%. Looking further ahead to the first quarter of 2027, which now falls within the relevant monetary policy horizon, inflation is forecast at 3.4%, still above the 3% target.
The currency path in the bank’s projections improved slightly to R$5.55/US$1.00, compared to the previous R$5.60/US$1.00.
Non-regulated prices, which are more sensitive to economic activity, show the greatest divergence from market expectations, suggesting the central bank may be more concerned about domestic demand or more confident in monetary policy’s effectiveness at slowing price growth.
Morgan Stanley (NYSE:MS) expects the first rate cut of 50 basis points to come in December 2025, bringing the Selic rate to 14.50%, with the easing cycle continuing through 2026 to end that year at 11.25%.
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