Brazil’s central bank held its benchmark interest rate at 13.75% on Wednesday, pausing a series of cuts that began in March. The unanimous decision came after President Luiz Inácio Lula da Silva won re-election and policymakers raised their inflation forecasts, even as they reported a more pronounced slowdown in Latin America’s largest economy.
Inflation forecasts move further above target
The central bank raised its inflation forecast for 2027 to 4.7% from 3.9%. It also lifted its projection for the 18-month horizon it uses to guide policy to 3.5% from 3.1% in September. Annual inflation was running at 4.6%, above the bank’s 3% target. Policymakers dropped a reference to possible further rate cuts from their statement and said borrowing costs would need to remain high enough to bring inflation back to target.
Before the October election run-off, investors had largely priced in quarter-point cuts in both November and December. The Brazilian real and local shares fell sharply after Lula’s victory, while market borrowing costs rose. Lula has pledged to improve the public finances gradually, and investors are waiting for details on how his government intends to manage spending in his fourth term.
Economists push back expectations for rate cuts
Goldman Sachs now expects the Selic rate to stay at its current level until at least the second quarter of 2028. Citi sees scope for gradual cuts in the second half of 2027 if the public finances strengthen and inflation expectations move closer to the central bank’s target.
The changed outlook comes as economists lower their growth forecasts. Itaú cut its projection for Brazil’s 2027 economic growth to 0.5% from 1.2%, citing tighter financial conditions. It also raised its inflation forecast for next year to 6.1% from 4.6%. For the central bank, that combination makes the next decision harder. Slower growth strengthens the case for lower rates, while higher inflation expectations make an early cut more difficult to justify.
Newshub Editorial in South America – 6 November 2026
Brazil’s central bank held its benchmark interest rate at 13.75% on Wednesday, pausing a series of cuts that began in March. The unanimous decision came after President Luiz Inácio Lula da Silva won re-election and policymakers raised their inflation forecasts, even as they reported a more pronounced slowdown in Latin America’s largest economy.
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