FX.co ★ Brazil Central Bank Raises Rate to 15%, Signals Possible Pause

The Central Bank of Brazil increased its Selic rate by 25 basis points to 15% at its June meeting, attributing this decision to persistent inflation and unanchored expectations. The Board underscored a highly uncertain international environment, influenced by US trade and fiscal policies along with volatile global financial markets, which continue to impact emerging economies. On the domestic front, although economic activity and the labor market show resilience, recent figures indicate both headline and core inflation are above target, with forecasts for 2025 and 2026 also surpassing established goals. The Copom anticipates a 3.6% inflation rate for 2026, highlighting ongoing inflationary risks such as pronounced services inflation, policy-induced exchange rate pressures, and unanchored long-term expectations. The committee indicated that this might be the final rate increase in the current cycle, contingent upon a reevaluation of the delayed effects of prior tightening measures. Nonetheless, the Copom stressed its readiness to further adjust monetary policy should inflation fail to move towards the target.