Brazil: Selic Pause Set to Continue Into 2027 – Societe Generale

Selic is set to remain at 13.75% through 2Q27 under economist Dev Ashish’s revised forecast, with rate cuts expected to resume only after inflation expectations stabilise and fiscal visibility improves. Societe Generale reports that post-election volatility and fiscal uncertainty prompted the Banco Central do Brasil (BCB) to pause its five-meeting easing cycle. Ashish’s outlook implies around 100 bps of easing, taking Selic to 12.75% by end-2027.

Can keeping rates high restore policy credibility?

"Elsewhere, the BCB left the Selic rate unchanged at 13.75% yesterday, bringing its five-meeting easing cycle to a halt in response to post-election market volatility and fiscal uncertainty."

"Policymakers acknowledged the more challenging inflation outlook but stopped short of validating market expectations for renewed tightening, opting instead to preserve flexibility."

"Despite weakening growth and still-restrictive real rates, the message was clear: restoring policy credibility takes priority."

"Our economist Dev Ashish now expects Selic rate to remain unchanged through 2Q27, with easing resuming only after inflation expectations stabilise and fiscal visibility improves, leaving scope for around 100bp of cuts in 2027 and an end-2027 Selic rate of 12.75%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)