BC maintains Selic at 15% and reinforces the message of maintaining this level for a prolonged period

The Central Bank decided this Wednesday to maintain the Selic rate at 15% per year, in a unanimous decision by its board of directors, and highlighted that the uncertain environment demands caution and that it will continue to evaluate whether maintaining interest rates at this level for a very long period will be enough to bring inflation to the target.

In a statement from the Monetary Policy Committee (Copom), which brought few changes in relation to the document from the July meeting, the statement that the Central Bank "anticipates a continuation of the interruption in the interest rate hike cycle" to examine the adjustment already made and then assess whether the Selic at 15% for a sufficiently long period would make inflation reach the 3% target was removed.

In the new version, the BC simply states that it "will remain vigilant, assessing whether maintaining the current level of the interest rate for a very long period is sufficient to ensure that inflation converges to the target."

The authority added that future monetary policy steps may be adjusted and that it will not hesitate to resume the adjustment cycle if it deems it appropriate.

According to Leonardo Costa, an economist at ASA, the change in the section leads to "clearer language about maintaining interest rates at a high level for a prolonged period."

Capital Economics, in turn, saw the change as a softening of the aggressive stance of the July meeting, assessing that the Central Bank could cut interest rates in the coming months with inflation likely continuing to ease and the economy struggling.

Wednesday's decision was in line with market expectations captured in a Reuters survey, in which all 41 economists interviewed from September 8 to 12 projected that the Central Bank would maintain the Selic rate at 15% this month.

ENHANCED CAUTION

In the document, Copom reported that it continues to monitor the issue of US tariffs and how developments in fiscal policy in Brazil impact monetary policy, going on to say that this scenario reinforces "the cautious stance in a scenario of greater uncertainty."

This Wednesday, the Central Bank improved its inflation projection for this year compared to July, from 4.9% to 4.8%, considering the reference scenario, which follows market projections for interest rates.

For the end of 2026, the projection was maintained at 3.6%. For the first quarter of 2027, the current relevant monetary policy horizon, the forecast also remained unchanged, standing at 3.4%.

To make the baseline scenario projections released this Wednesday, Copom considered an exchange rate starting at R$5.40, below the R$5.55 used at the July meeting.

The Central Bank highlighted that economic activity has shown some moderation, as expected, but with a still dynamic labor market, while inflation measures remain above the target.

Market expectations for prices remain unanchored, despite a recent gradual improvement. The 2025 IPCA forecast in the Focus bulletin fell from 5.09% before the Copom meeting in July to 4.83% this week. For 2026, expectations fell from 4.44% to 4.30%, while the 2027 figure went from 4.00% to 3.90%.

The center of the continuous inflation target is 3%, always with a tolerance margin of 1.5 percentage points either way.

For XP's chief economist, Caio Megale, the Central Bank gave two "slightly harsher" signals than expected this Wednesday. The first was maintaining its assertion that it could raise interest rates again if necessary. The second was maintaining its inflation projection for 2027, without moving any closer to the target.

"It's a clear signal from the Central Bank that projections suggest inflation is significantly above target and, therefore, a significant monetary policy challenge ahead. It reinforces that we're very unlikely to see interest rate cuts in the short term," he said.

After seven consecutive hikes that took the Selic rate to its highest level in 20 years, the Central Bank interrupted the hike cycle in July, deciding this week to maintain the rate at 15% for the second consecutive year.

In official communications and public statements by directors, Copom has advocated maintaining the Selic rate at 15% for a very long period. Central Bank President Gabriel Galípolo emphasized in August that the "continued interruption" in the interest rate hike cycle—a term now removed from the statement—would allow the agency to monitor the economy and assess whether the Selic rate would be restrictive enough to bring inflation to the target.

In its statement this Wednesday, the Central Bank made no changes to its assessment of risks for prices going forward, reaffirming that the risks for inflation, both upward and downward, remain higher than usual.

Earlier on Wednesday, the Federal Reserve cut the U.S. benchmark interest rate by 25 basis points and indicated it will steadily reduce borrowing costs through the end of this year.