Copom cuts Selic to 13.75% and warns on fiscal risks

The Monetary Policy Committee of the Central Bank of Brazil reduced the Selic rate from 14% to 13.75% on September 16, 2026. This marked the fifth consecutive cut of 0.25 percentage points. The benchmark interest rate reached its lowest level since March 2025, when it stood at 13.25%.

In its meeting minutes released on September 22, 2026, the committee reaffirmed that waning efforts on structural reforms and fiscal discipline, together with higher directed credit and public debt uncertainty, could raise the neutral interest rate. The central bank highlighted that fiscal policy affects aggregate demand in the short term and impacts debt sustainability and the term premium along the yield curve over the structural horizon.

Recent consumer inflation readings slowed in both headline figures and underlying measures. Over 12 months, inflation remains below the upper tolerance ceiling but above the 3% target. Meanwhile, producer price variations accelerated in wholesale indices for both intermediate and consumer goods.

Gross domestic product data for the second quarter of 2026 confirmed a moderation in domestic economic activity. The central bank noted that free-market credit slowed, particularly in long-term borrowing, while directed credit expanded for real estate loans to individuals and government-guaranteed corporate lines.