The Brazilian real traded around R$5.15 per US dollar in September, showing little reaction after the Central Bank of Brazil (BCB) cut the Selic rate by 25 basis points to 13.75%. The BCB refrained from signaling a clear path for future moves, emphasizing that heightened uncertainty requires prudence and caution in the conduct of monetary policy. This was the final policy meeting before the October presidential election.
The decision came shortly after the US Federal Reserve raised the federal funds rate by 25 basis points to a range of 3.75%–4.00%. The resulting narrowing of the interest-rate differential has lent support to the US dollar, although this effect had largely been priced in, as both central bank decisions matched market expectations.
At the same time, gains by Flávio Bolsonaro in recent presidential election polls have provided some support to the real, as markets tend to view Bolsonaro as fiscally conservative. Nevertheless, elevated domestic interest rates and subdued business activity continue to weigh on Brazil’s economic outlook.
