With inflation slowing down, but some prices, such as services, under pressure, The Monetary Policy Committee (Copom) of the Central Bank (BC) holds its first meeting of the year this Wednesday (28).. Even with the recent fall of the dollar, market analysts believe that the rate will remain at the highest level in almost 20 years.
Currently at 15% per year, Selic is at its highest level since July 2006, when it was at 15.25% per year. From September 2024 to June last year, the rate was raised seven times in a row, but has not been changed in the last four meetings.
The decision on the Selic Rate will be announced early this Wednesday evening. The Copom will be missing because the mandate of the directors of Organization of the Financial System, Renato Gomes, and of Economic Policy, Paulo Pichetti, expired at the end of 2025. President Luiz Inácio Lula da Silva will only forward the nominations for replacements upon the return of the National Congress, in February.
In the minutes of the last meeting, in December, the Copom informed that the Selic rate will be maintained at 15% per year for an extended period of time to guarantee the convergence of inflation to the target, without indicating when it would begin to lower interest rates.
According to the Copom minutes, the current scenario continues to be marked by high uncertainty, which requires caution in the conduct of monetary policy. In the domestic scenario, some prices, such as services, continue to put pressure on inflation, despite the economic slowdown.
According to the most recent edition of the Focus bulletin, a weekly survey of market analysts, the basic rate must be maintained at 15% per year until March. However, the chances of a reduction in January have increased in recent days with the recent drop in the dollar, which returned to around R$5.20.
Inflation
The behavior of inflation remains unknown. Preview of official inflation, the Broad National Consumer Price Index-15 (IPCA-15) it was just 0.2% in October and accumulated 4.5% in 12 monthshaving returned to the ceiling of the goal. The full IPCA for November will only be released this Wednesday.
According to the latest Focus bulletin, a weekly survey of financial institutions carried out by the BC, the inflation estimate for 2025 fell to 4.4%, against 4.55% four weeks ago. This represents inflation just below the ceiling of the continuous target established by the National Monetary Council (CMN), of 3%, which could reach 4.5% due to the tolerance interval of 1.5 points.
Selic Rate
The basic interest rate is used in negotiations of public bonds issued by the National Treasury in the Special Settlement and Custody System (Selic) and serves as a reference for other rates in the economy. It is the Central Bank’s main instrument for keeping inflation under control. The BC operates daily through open market operations – buying and selling federal public bonds – to keep the interest rate close to the value defined at the meeting.
When Copom increases the basic interest rate, it aims to contain heated demand, and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. Therefore, higher rates can also make it difficult for the economy to expand. But, in addition to the Selic, banks consider other factors when defining the interest charged to consumers, such as risk of default, profit and administrative expenses.
By reducing the Selic, the tendency is for credit to become cheaper, encouraging production and consumption, reducing inflation control and stimulating economic activity.
The Copom meets every 45 days. On the first day of the meeting, technical presentations are made on the evolution and prospects of the Brazilian and world economies and the behavior of the financial market. On the second day, the members of the Copom, formed by the BC board, analyze the possibilities and define the Selic.
Continuous goal
For the new continuous goal system In force since January 2025, 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 January 2026, inflation since February 2025 is compared with the target and tolerance range. In February 2026, the procedure is repeated, with calculation starting in March 2025. In this way, the verification moves over time, no longer being restricted to the closed index from December of each year.
In the latest Monetary Policy Report, released at the end of December by the Central Bank, the monetary authority maintained the forecast that the IPCA will end 2026 at 3.5%, but the estimate must be revised. The next edition of the document, which replaced the Inflation Report, will be released at the end of March.
