Brazil holds 15.00% Selic Rate
Banco Central do Brasil COPOM Maintains Contractionary Stance Amid Elevated Uncertainty and De-anchored Inflation Expectations
Brasilia, Brazil November 5th, 2025 -
The global economic environment still remains uncertain due to factors such as economic policy and the economic outlook in the United States, alongside changing global financial conditions. This scenario requires particular caution from emerging market economies, especially amid heightened geopolitical tensions.
Domestically, the set of indicators continues to demonstrate an expected path of moderation on economic growth, even as the labor market continues to show strength. However, inflation remains a persistent concern. Recent releases show that headline inflation and measures of underlying inflation have shown some improvement but remain above the inflation target.
The current scenario is marked by de-anchored inflation expectations. Inflation expectations collected by the Focus survey for 2025 and 2026 remained above the inflation target, standing at 4.5% and 4.2%, respectively. The relevant horizon for monetary policy, the second quarter of 2027, has Copom’s inflation projection at 3.3% in the reference scenario. The projected year-over-year IPCA change in the reference scenario is 4.6% for 2025 and 3.6% for 2026.
Monetary Policy Decision
In light of these pressures, the Monetary Policy Committee (Copom) decided to maintain the Selic rate at 15.00% p.a.. This decision is judged to be consistent with the strategy required for inflation convergence toward a level around its target throughout the relevant horizon.
The Committee emphasizes that ensuring inflation convergence in this environment—characterized by de-anchored expectations, high inflation projections, and resilience in economic activity and labor market pressures—requires a significantly contractionary monetary policy for a very prolonged period. The current highly uncertain scenario necessitates a cautious monetary policy stance. Copom believes that maintaining the interest rate at its current level for a very prolonged period will be enough to ensure the convergence of inflation to the target. While committed to its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and promoting full employment.
The Committee noted that it will remain vigilant, and future monetary policy steps can be adjusted, emphasizing that it will not hesitate to summarize the rate hiking cycle if appropriate.
Risks and Reference Scenario Assumptions
The risks to the inflation scenarios, both to the upside and to the downside, continue to be higher than usual.
Upside risks for the inflation outlook and expectations include:
• A more prolonged period of de-anchoring of inflation expectations.
• A stronger-than-expected resilience of services inflation due to a more positive output gap.
• A conjunction of internal and external economic policies that could have a stronger-than-expected inflationary impact, such as through a persistently more depreciated currency.
Downside risks include:
• A greater-than-projected deceleration of domestic economic activity, impacting the inflation scenario.
• A steeper global slowdown stemming from the trade shock and the scenario of heightened uncertainty.
• A reduction in commodity prices with disinflationary effects.
The Committee continues to monitor announcements regarding tariffs by the USA to Brazil. Furthermore, they are watching how developments on domestic fiscal policy impact monetary policy and financial assets.
Within the reference scenario used for projections, the interest rate path is based on the Focus survey. The exchange rate starts at USD/BRL 5.40 and evolves according to purchasing power parity (PPP). Additionally, oil prices are assumed to follow the future market curve for the following six months and then increase by 2% per year onwards, while the energy tariff flag is assumed to be “yellow” in December of the years 2025 and 2026.