Brazil’s central bank cut its benchmark interest rate to 14.75% in March, a smaller move than the 50 bps reduction widely anticipated. The bank said a gradual calibration of monetary policy is now required, noting that the extended period of tighter rates has clearly begun to weigh on economic activity.
External conditions remain challenging: the escalation of geopolitical tensions in the Middle East and heightened global financial volatility continue to pressure emerging markets. Domestically, economic growth is slowing, even as the labour market shows resilience and inflation has improved, though it still exceeds the official target.
Inflation expectations stand at 4.1% for 2026 and 3.8% for 2027, while Copom projects inflation at 3.3% by the third quarter of 2027. The committee highlighted upside risks stemming from stubbornly high services inflation and a weaker exchange rate, and downside risks from a sharper-than-expected global slowdown or falling commodity prices. In its assessment, the current decision is consistent with guiding inflation back to target while ensuring a smoother adjustment in the monetary policy cycle.
