WEEKLY REPORT Fed signals higher rates while Copom leaves room for further cuts – 09/18
✅ In the United States, the Fed adopted a more hawkish tone amid a resilient economy and still-persistent inflation. The Committee raised the federal funds rate by 25 bps, to 3.75%-4.00%, and revised upward the expected path for interest rates, with the median dot for end-2026 rising from 3.8% to 4.1%. During the press conference, Kevin Warsh emphasized that recent inflation trends had not shown sufficient improvement and that financial conditions could not yet be characterized as restrictive. Against this backdrop, we revised our scenario and now expect another 25 bps hike in December 2026, followed by an additional hike of the same magnitude in the first quarter of 2027.
✅ In Brazil, the Copom presented a more constructive assessment of the domestic outlook, with greater confidence in the slowdown in economic activity and the improvement in inflation. The Committee lowered the Selic rate to 13.75%, maintaining a cautious and data-dependent stance, without providing explicit guidance on the next steps but also without closing the door to further cuts. The communication acknowledged clearer signs of moderating activity and improving current inflation dynamics, while the inflation projection for the relevant monetary policy horizon was maintained at 3.2%. Against this backdrop, we revised our Selic rate forecast to 13.25% by end-2026, incorporating two additional consecutive cuts at the November and December meetings.
