As expected, the Copom confirmed the end of the tightening cycle while maintaining a hawkish tone. In a unanimous decision, the committee held the Selic rate at 15.0%, reinforcing the strategy of keeping interest rates at a restrictive level for an extended period until inflation converges to the target. It also stated it will not hesitate to resume the tightening cycle if deemed appropriate.
The economic activity scenario, broadly in line with expectations, appears to reinforce a moderation in growth, while the external backdrop has become more adverse and uncertain due to U.S. trade policy.
Additionally, as expected, the BCB’s projection for the relevant monetary policy horizon, IPCA for 1Q27, remained unchanged at 3.4% (Buysidebrazil estimate for BCB projection: 3.4%; BSB projection: 4.2%; Focus survey: 4.4%). The projection for 4Q26, updated in the June meeting, stood at 3.6%, with the balance of risks still assessed as symmetric.
Considering our recent studies on potential disinflationary impacts on annual IPCA forecasts (including wholesale price trends and trade tariffs), we believe the disinflation process may unfold more rapidly. Therefore, our current expectation for rate cuts starting in April 2026 could be brought forward.
Coming next: Minutes will be published next Tuesday; the Pre-Copom Survey will be released on Aug 6.
