{"id":96848,"date":"2025-12-08T15:09:54","date_gmt":"2025-12-08T18:09:54","guid":{"rendered":"https:\/\/murray.adv.br\/?p=96848"},"modified":"2025-12-08T15:09:54","modified_gmt":"2025-12-08T18:09:54","slug":"markets-expect-selic-to-stay-at-15-as-january-cut-remains-unclear","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/markets-expect-selic-to-stay-at-15-as-january-cut-remains-unclear\/","title":{"rendered":"Markets expect Selic to stay at 15% as January cut remains unclear"},"content":{"rendered":"
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Brazil\u2019s Central Bank signals caution despite slowing activity and improved inflation<\/strong><\/em><\/h6>\n<\/div>\n<\/div>\n
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12\/08\/2025 <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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Brazil\u2019s economy is slowing and inflation is improving, but the persistently conservative stance of the Central Bank\u2019s Monetary Policy Committee (COPOM) has led to a near-unanimous market consensus that the Selic benchmark interest rate will be held steady at 15% in this week\u2019s meeting.<\/p>\n<\/div>\n

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Out of 112 institutions surveyed, only two expect the monetary easing cycle to begin on December 10. Most economists told Valor that COPOM will likely stick to a cautious message and leave the door open for a potential cut in January. The market remains divided over that possibility: 54% expect cuts to begin in January 2026, while 44% see them starting in March or later.<\/p>\n<\/div>\n

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The Central Bank\u2019s cautious tone, especially from its chair, Gabriel Gal\u00edpolo, has created uncertainty over what signals may emerge from this week\u2019s statement.<\/p>\n<\/div>\n

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Among those expecting little change from COPOM\u2019s November message is Marcela Rocha, chief Latin America economist at Principal Asset Management. She sees little incentive for the committee to soften its tone now. Rocha expects only minor adjustments to the wording and believes the Bank\u2019s inflation forecast will stay at 3.3% over the relevant horizon.<\/p>\n<\/div>\n

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\u201cA rate cut in January would be justifiable, but the Central Bank\u2019s messaging has remained hawkish. It hasn\u2019t shown much enthusiasm for the recent better inflation numbers, nor emphasized the economic slowdown. Gal\u00edpolo himself continues to stress resilient labor market data,\u201d she said.<\/p>\n<\/div>\n

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While Rocha\u2019s base case includes a 25-basis-point cut in January, bringing the Selic to 14.75%, she admits confidence is low due to COPOM\u2019s conservative posture. She now sees a greater chance of the first cut coming in March.<\/p>\n<\/div>\n

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\u201cWhat still leaves January on the table was Gal\u00edpolo\u2019s recent attempt to downplay the phrase \u2018quite prolonged\u2019 [regarding the high-rate period],\u201d she noted. Rocha referred to Gal\u00edpolo\u2019s remarks at an XP Investimentos event on December 1, where he said that keeping or removing that phrase doesn\u2019t indicate any specific COPOM decision. \u201cI don\u2019t think we have an obligation to build codes into our communication to signal when we\u2019ll act,\u201d Gal\u00edpolo said.<\/p>\n<\/div>\n

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In Rocha\u2019s view, keeping the phrase in December\u2019s statement no longer rules out a January cut. Still, she said, \u201cThe bar for a cut is now even higher.\u201d<\/p>\n<\/div>\n

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\u201cWe\u2019d need to see positive surprises in the data, not just in line with expectations, and perhaps another drop in inflation expectations in the Focus survey,\u201d she said. \u201cInflation data may surprise on the optimistic side, but markets could still remain skeptical about a January cut.\u201d<\/p>\n<\/div>\n

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Outlook for January and beyond<\/strong><\/p>\n<\/div>\n

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Rafaela Vit\u00f3ria, chief economist at Inter, said the phrase \u201cquite prolonged\u201d refers broadly to the period of tight monetary policy and shouldn\u2019t be seen as a signal for COPOM\u2019s next moves.<\/p>\n<\/div>\n

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\u201cEven if the Selic ends 2026 at 12%, that\u2019s still very restrictive,\u201d she said. Still, if December\u2019s statement is too similar to November\u2019s, it would suggest little openness to discussing a rate cut.<\/p>\n<\/div>\n

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\u201cWe\u2019re watching other parts of the statement for clues. We\u2019re still far from the neutral rate, so the beginning of cuts would just ease some of the current excess,\u201d she said.<\/p>\n<\/div>\n

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Ivo Chermont, chief economist at Quantitas, believes Gal\u00edpolo was effective in defusing the significance of the phrase and that the Central Bank does not want to commit to any path yet, given the number of data points still to come before January.<\/p>\n<\/div>\n

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\u201cGal\u00edpolo tends to say it\u2019s not that he knows and won\u2019t say\u2014it\u2019s that he really doesn\u2019t know. I think COPOM\u2019s language will be neutral relative to market pricing and won\u2019t give a concrete signal,\u201d said Chermont, who expects the first cut only in March.<\/p>\n<\/div>\n

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Chermont also pointed out that there were other times when the Central Bank cut rates even while its inflation forecast was still close to the target, but this time could be riskier since Focus survey expectations are also above target.<\/p>\n<\/div>\n

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\u201cIt would be the first time COPOM cuts with both its own model and Focus outside the target range. Waiting could buy three or four months for Focus to move closer to the center of the target. A hawkish surprise would help bring expectations down. And even the calendar helps: from January to March, with Carnival, there\u2019s less political noise. That would be very advantageous.\u201d<\/p>\n<\/div>\n

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Still, Chermont noted that if fourth-quarter activity data show clearer signs of a slowdown, the outlook could shift. His firm expects the Selic to end 2026 at 11.5%.<\/p>\n<\/div>\n

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Optimism for early cuts<\/strong><\/p>\n<\/div>\n

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Vit\u00f3ria at Inter is more optimistic and sees room for the easing cycle to begin in January, based on the slowdown in activity and inflation. This could be reflected in this week\u2019s COPOM statement, she said.<\/p>\n<\/div>\n

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\u201cWe expect a slightly softer tone in the statement, opening space for a rate cut discussion in January,\u201d she said. She sees further room for inflation expectations in the Focus survey to decline, along with a more favorable external environment. Expectations of continued rate cuts by the U.S. Federal Reserve should help keep the dollar stable, supporting Brazil\u2019s disinflation process.<\/p>\n<\/div>\n

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She also said recent economic data,\u00a0especially third-quarter GDP<\/a>, showed a clearer deceleration beyond COPOM\u2019s gradual slowdown scenario. \u201cThe deceleration was clearer, especially given the GDP\u2019s qualitative breakdown, with a larger drop in consumption, which favors a more benign inflation outlook.\u201d<\/p>\n<\/div>\n

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Inter\u2019s base case sees the Selic ending 2026 at 12%, in line with market-implied rates. For now, Vit\u00f3ria doesn\u2019t see the election year as an obstacle to short-term rate cuts. But if volatility drives the exchange rate per U.S. dollar closer to R$6, COPOM might be forced to slow the easing cycle.<\/p>\n<\/div>\n

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Rocha of Principal, meanwhile, expects the Selic to fall more modestly next year to around 13%. She warned\u00a0that a resilient labor market\u00a0<\/a>and expected demand-side stimulus tied to the election year could pose upside risks to growth and inflation.<\/p>\n<\/div>\n

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In addition to election volatility and renewed focus on Brazil\u2019s fiscal outlook, she sees a less favorable global backdrop for the real. \u201cEven if rate differentials work against the dollar as the Fed eases, the U.S. economy is still expected to grow more than 2%. So we don\u2019t see much room for the dollar to weaken. A stronger or steady dollar, combined with local political uncertainty, could weigh on the real,\u201d she said.<\/p>\n

*By\u00a0Gabriel Caldeira\u00a0and\u00a0Gabriel Roca\u00a0\u2014 S\u00e3o Paulo<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Brazil\u2019s Central Bank signals caution despite slowing activity and improved inflation       12\/08\/2025 Brazil\u2019s economy is slowing and inflation is improving, but the persistently conservative stance of the Central Bank\u2019s Monetary Policy Committee (COPOM) has led to a near-unanimous market consensus that the Selic benchmark interest rate will be held steady at 15% […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8106],"tags":[26638,26637],"class_list":["post-96848","post","type-post","status-publish","format-standard","hentry","category-murray-news","tag-brazils-central-bank-signals-caution","tag-markets-expect-selic-to-stay-at-15"],"yoast_head":"\nMarkets expect Selic to stay at 15% as January cut remains unclear - Murray Advogados<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/murray.adv.br\/en\/markets-expect-selic-to-stay-at-15-as-january-cut-remains-unclear\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Markets expect Selic to stay at 15% as January cut remains unclear - 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