Copom Holds Selic Rate Steady
Amid Heightened Uncertainty and Inflation Concerns
Brazil - December 11, 2025
In its 275th meeting, the Monetary Policy Committee (Copom) made the decision to maintain the Selic rate at 15.00% per annum. This action reinforces a strategy of ensuring the convergence of inflation to its target through a significantly contractionary monetary policy for a very prolonged period.
Global and Domestic Economic Context
The Committee noted that the global environment remains uncertain, largely due to the economic policy and outlook in the United States, which is altering global financial conditions. This scenario, combined with heightened geopolitical tensions, necessitates a cautious stance for emerging market economies. Furthermore, Copom is actively monitoring announcements on tariffs by the USA towards Brazil and the impact of domestic fiscal policy on financial assets and monetary policy.
Domestically, indicators align with an expected path of moderation in economic growth. However, the current scenario is also characterized by the resilience of economic activity and pressures in the labor market.
Persistent Inflation and Deanchored Expectations
While recent data shows some improvement in headline inflation and measures of underlying inflation, both categories remain above the official inflation target. A significant factor contributing to the need for prolonged contractionary policy is the persistent environment of deanchored inflation expectations.
Inflation expectations collected via the Focus survey for 2025 and 2026 are 4.4% and 4.2%, respectively, remaining above the inflation target. Copom’s inflation projections for the second quarter of 2027—currently the relevant horizon for monetary policy—stand at 3.2% in the reference scenario. Under this reference scenario, the projected IPCA year-over-year changes are 4.4% for 2025 and 3.5% for 2026.
Risks to the Inflation Outlook
The Committee assesses that the risks to the inflation scenarios are higher than usual, impacting both the upside and downside.
Upside Risks (Inflationary) include:
A more prolonged period during which inflation expectations remain deanchored.
Stronger-than-expected resilience in services inflation, potentially due to a more positive output gap.
The conjunction of internal and external economic policies resulting in a stronger-than-expected inflationary impact, such as a persistently more depreciated currency.
Downside Risks (Disinflationary) include:
A greater-than-projected deceleration of domestic economic activity.
A steeper global slowdown stemming from the trade shock and increased uncertainty.
A reduction in commodity prices, which would have disinflationary effects.
Copom judges the decision to maintain the rate at 15.00% p.a. as consistent with its strategy to ensure inflation convergence to the target. The fundamental objective of the Committee is to ensure price stability, while the decision also implies supporting the smoothing of economic fluctuations and fostering full employment. The Committee maintains it will remain vigilant and will not hesitate to resume the rate hiking cycle if appropriate.