The decline in inflation and the slowdown in the economy meant that the Central Bank (BC) did not change interest rates. Unanimously, the Monetary Policy Committee (Copom) maintained the Selic Rate, the economy’s basic interest rate, at 15% per year. The decision was expected by the financial market.
In a note, the BC reported that the external environment remains uncertain due to the situation and economic policy in the United States, with repercussions on global financial conditions.
In Brazil, the statement highlighted, inflation remains above the target, despite the slowdown in economic activity, which indicates that interest rates will remain high for a long time.
“The current scenario, marked by high uncertainty, requires caution in the conduct of monetary policy. The committee assesses that the strategy of maintaining the current level of interest rates for a very long period is sufficient to ensure the convergence of inflation to the target”, highlighted the BC.
The Copom did not rule out the possibility of raising interest rates again “if it deems it appropriate”.
This is the third meeting in a row in which Copom maintains basic interest rates. The rate is at its highest level since July 2006, when it was 15.25% per year.
After reaching 10.5% per year in May last year, the rate began to rise in September 2024. Selic reached 15% per year at the July meetinghaving been maintained at that level since then.
Inflation
Selic is the Central Bank’s main instrument for keeping official inflation under control, measured by the Broad National Consumer Price Index (IPCA). In September, the IPCA accelerated to 0.48%influenced by the energy bill. As a result, the indicator accumulates an increase of 5.17% in 12 months, above the ceiling of the continuous inflation target.
However, October’s IPCA-15, which works as a preview of official inflation, came below expectations. The indicator slowed down because of food prices, which fell for the fifth month in a row.
For the new continuous goal systemin force since January, the inflation target that must be pursued by the BC, defined by the National Monetary Council, is 3%, with a tolerance range of 1.5 percentage points up or down. That is, the lower limit is 1.5% and the upper limit is 4.5%.
In the continuous target model, the target is determined month by month, considering the inflation accumulated over 12 months. In November 2025, inflation since December 2024 is compared with the target and tolerance range. In December, the procedure is repeated, with calculation starting in January 2025. In this way, the verification moves over time, no longer being restricted to the closed index for December of each year.
In the latest Monetary Policy Report, released at the end of September by the Central Bank, the monetary authority decreased to 4.8% the IPCA forecast for 2025, but the estimate may be revised, depending on the behavior of the dollar and inflation. The next edition of the document, which replaced the old Inflation Report, will be released at the end of December.
Market forecasts are more optimistic. According to the bulletin Focusweekly survey of financial institutions released by the BC, official inflation is expected to close the year by 4.55%slightly above the target ceiling. A month ago, market estimates were at 4.8%.
Most expensive credit
The increase in the Selic rate helps contain inflation. This is because higher interest rates make credit more expensive and discourage production and consumption. On the other hand, higher rates hinder economic growth. In the last Monetary Policy Reportthe Central Bank growth projection decreased from 2.1% to 2% for the economy in 2025.
The market projects slightly better growth. According to the latest edition of the bulletin Focuseconomic analysts predict expansion of 2.16% of GDP in 2025.
The basic interest rate is used in public bond negotiations in the Special Settlement and Custody System (Selic) and serves as a reference for other interest rates in the economy. By readjusting it upwards, the Central Bank holds back the excess demand that puts pressure on prices, because higher interest rates make credit more expensive and encourage savings.
By reducing basic interest rates, the Copom makes credit cheaper and encourages production and consumption, but weakens inflation control. To cut the Selic, the monetary authority needs to be sure that prices are under control and are not at risk of rising.
