Copom begins meeting that will define basic interest rate

The Copom meets every 45 days. On the first day of the meeting, technical presentations are made on the evolution and prospects of the Brazilian and world economies, in addition to the behavior of the financial market.

On the second day, committee members analyze the scenarios and define the level of the basic interest rate (Selic).

Focus Bulletin

The committee's fifth meeting takes place one day after the financial market reduced Selic (base interest rate) expectations for 2026 from 14% to 13.75%, as shown in the Focus Bulletin released on Monday (3).

This was the first time since March that the market revised downwards expectations for the basic interest rate.

In previous meetings, the Copom even raised the possibility of cutting the Selic Rate. However, the conflict between the United States and Iran ended up generating uncertainty, mainly in some prices – especially fuel, which led the committee to adopt more caution in its decisions.

Currently at 14.25% per year, the Selic is at its lowest level in 2026, after three consecutive reductions of 0.25 percentage points promoted by the Copom at meetings in March, April and June.

Inflation

Inflation expectations for 2026 have improved in Brazil, according to the most recent Focus Bulletin.

For the fifth consecutive week, the analysts consulted by the BC to prepare the document reduced the projection for the Broad National Consumer Price Index (IPCA, considered the country's official inflation) for the year. The estimate went from 5.12% to 5.03%.

Despite the improvement, the projection remains above the ceiling of the continuous inflation target pursued by the Central Bank. Defined by the National Monetary Council (CMN), the target is 3%, with a tolerance range of 1.5 percentage points up or down. Thus, the upper limit is 4.5%.

Selic Rate

The basic interest rate is used in negotiations on public bonds issued by the National Treasury, serving as a reference for other rates in the economy. It is the Central Bank's main instrument for keeping inflation under control.

When Copom increases the basic interest rate, the purpose is to contain heated demand. Higher interest rates make credit more expensive and encourage savings, reducing pressure on prices.

On the other hand, higher rates can also make it difficult for the economy to expand. In addition to the Selic, banks consider factors such as default risk, administrative costs and profit margin when defining the interest charged to consumers.

When the Selic is reduced, the tendency is for cheaper credit, favoring consumption and investments, stimulating economic activity.

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