MediumIV Macro Policy & Sovereign Debt4 November 2026, Wednesday
Brazil's central bank halts rate cuts at first post-election meeting
Copom unanimously held the Selic at 13.75% on 4 November, ending a 5-step easing cycle that began in March. Of 75 institutions in the Broadcast survey, 39 had expected a 25-basis-point cut.
Brazil's central bank held its rate at 15% for 10 months, from June 2025 to March 2026. From March 2026 it cut 5 times by 25 basis points each, easing by 125 basis points in total. The 4 November decision was the first meeting since Lula's re-election. In the Projeções Broadcast survey, 39 of 75 institutions expected 13.50% and 36 expected 13.75%; the Selic ended above the survey median for the first time since June 2025.
According to Suno, the reasons given were exchange-rate volatility after the run-off, the Iran war's impact on commodities and supply chains, and a possible El Niño. The 12-month IPCA-15 rate of 4.62% exceeded 4.5%, the ceiling of the 1.5-point tolerance band around the 3% target. Two board seats on Copom have been vacant since late 2025, and Lula has yet to send nominees to Congress. The decision gave no date for the next cut.
Talay assessment
Bottom line
Copom halted its easing cycle as inflation broke above the target ceiling and post-election currency pressure persisted. The decision shows that uncertainty over fiscal policy in Lula's second term is constraining monetary policy. The likeliest path is that the Selic stays at 13.75% until the fiscal framework becomes clear.
Likely effects
- Brazilian creditNegative1–6 months
Holding the Selic at 13.75% keeps interest costs on public debt high and makes campaign pledges harder to finance.
- RealPositiveWeeks
The unexpected pause supports the real in the near term; without a fiscal framework, that support will be limited.
- TürkiyeUncertain1–6 months
With easing paused in Brazil and other emerging markets, competition intensifies for carry flows into high-real-rate countries.
Possibilities, ranked
- 1Extended hold55%
Copom keeps 13.75% until IPCA falls back below the target ceiling.
Watch: The 12-month IPCA rate falling below 4.5%
- 2Early return to cuts30%
The currency calms, a fiscal framework is announced and Copom cuts by 25 basis points in December.
Watch: The December Copom decision and the 2027 budget framework
- 3Hike debate15%
Currency pressure and energy prices lift inflation expectations, and Copom puts tightening on the table.
Watch: A rise in 2027 inflation expectations in the Focus survey
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Selic▲ 13.75%
- IPCA-15 (12 months)▲ 4.62%
- Institutions expecting a cut▲ 39/75