By Marcela Ayres
BRASILIA, Aug 5 (Reuters) – Brazil’s central bank on Wednesday cut interest rates by 25 basis points at a fourth straight policy meeting as expected and left the door open for more cuts, as recent data pointed to slower inflation and a cooling economy.
The bank’s rate-setting committee, called Copom, unanimously cut the benchmark Selic rate to 14.00%, taking borrowing costs to their lowest level since March 2025 as expected by 38 of 42 analysts polled by Reuters.
The decision extends a rate-cutting cycle that began in March, as easing price pressures and signs of slowing growth give policymakers greater confidence that inflation is converging toward target.
Still, the central bank stopped short of signaling its next move, making clear that it would depend on incoming economic data ahead of a September policy meeting.
“The Committee will continue to monitor developments in the scenario in order to keep monetary policy adequately restrictive to ensure convergence to the inflation target,” Copom wrote in its policy statement.
At its June meeting, policymakers drew scrutiny by placing greater emphasis on inflation projections beyond their formal policy horizon in order to explain further easing even as their balance of risks deteriorated.
Since then, however, the backdrop has become more favorable for further rate cuts. Inflation has run below expectations, while economic activity indicators have pointed to a clearer loss of momentum, reinforcing expectations of a more benign outlook.
Attention now turns to whether the easing cycle will extend into September, with the central bank refraining from clear forward guidance and showing little change in its inflation projections.
It forecast annual inflation of 3.2% over its relevant 18-month policy horizon, which has now shifted to the first quarter of 2028, in line with 3.2% in its June estimates.
Brazil’s official inflation target is 3%, with a tolerance band of 1.5 percentage points on either side.
For 2026, the central bank lowered its inflation forecast to 5.1% from 5.2% in June. Its projection for 2027 was revised to 3.8% from 3.7%.
(Reporting by Marcela AyresEditing by Brad Haynes)
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