Another factor could reinforce the start of Selic cuts, at the first Copom meeting of 2026, which is the possibility of a new interest rate cut, at next week’s meeting of the Federal Reserve, the Central Bank of the United States.
The GDP expansion, of just 0.1% in the third quarter, reinforced the expectation regarding the beginning of the interest cut, by the Copom, in January, not only by confirming the slowdown in the economy, in general, but also by its composition. Family consumption grew by just 0.1%, despite good numbers in the labor market, with record levels of wages. This shows that high interest rates may already be having a greater effect on the pace of consumption, regardless of the increase in income from work and social programs. In the same sense, there was also a small expansion in imports, of 0.3%, despite the appreciation of the Real against the dollar. Imports also reflect the evolution of domestic demand, in addition to investments.
In parallel with the GDP data, inflation is falling, the IPCA 15 has already reached the target ceiling, of 4.5%, accumulated over 12 months. And market projections indicate an even smaller variation.
Another factor could reinforce the start of Selic cuts, at the first Copom meeting of 2026, which is the possibility of a new interest rate cut, at next week’s meeting of the Federal Reserve, the Central Bank of the United States. Lower interest rates there tend to favor the flow of investments to other markets, with Brazil maintaining its attractiveness due to the rate differential. There will also be a Copom meeting next week, but here the unanimous bet is to maintain the Selic at 15%.
As for 2026, even if there is some cut in January, there is doubt as to the intensity of the Selic drop throughout the year. Firstly, despite falling, inflation projections are still far from a faster convergence towards the center of the target, which is 3%. And that is the objective of the Central Bank. On the other hand, despite signs of a slowdown in the economy, which could inhibit the rise of prices and inflation, election years tend to see an increase in public spending. Next year there will already be a reinforcement in the availability of income for millions of Brazilians, due to the increase in the Income Tax exemption range. Conditions that can give some impetus to consumption.
In the prospecting scenario, fiscal uncertainties still persist. Even if next year’s budget is approved, predicting a surplus in public accounts, within the parameters of the fiscal target, there are doubts regarding the execution of revenues and expenses, apart from the inevitable increase in public debt. The fiscal issue is one of the relevant points in the calibration of interest policy, due to all the implications it may have on factors that weigh on inflation.
As can be seen, there are several factors that can influence the expected interest rate cut. A cut will occur, but it will hardly cause the Selic to fall to a level that reverses the contractionary monetary policy. The Central Bank must keep the reins tight, as long as it is unsure about the objective of moving inflation towards the center of the target.
*This text does not necessarily reflect the opinion of Jovem Pan.
