Brazil still has room for more interest rate cuts, says finance minister

The rate path, stripped down

The cycle began 2026 with the Selic at 15%. Three consecutive 25-basis-point moves later, it sits at 14.25%. At the start of the year, sell-side analysts were modeling a much steeper path, with some projecting a terminal rate near 12% by year-end. Those estimates have been revised. Two pressures drove the revision: fuel prices inflated by the Middle East conflict, and expansionary public spending in an election year. The trajectory is no longer a clean downslope. Inflation expectations are climbing while the bank keeps easing, and the gap between the two is the only number that matters for the next decision.

The contradiction buried in the statement

Copom cut rates, but in the same communication raised its inflation forecast to 3.7% — above market consensus. That is the detail that has economists openly feuding. Alberto Ramos of Goldman Sachs called the room for further cuts "very limited" and said his team would reassess the path after the meeting minutes. Daniel Xavier Francisco, chief economist at Banco ABC Brasil, expects the Selic parked at 14.25% through year-end. Natalie Victal of SulAmérica Investimentos sees the rate ending 2026 at 14%. Carlos Lopes at bank BV calls the current easing cycle effectively over — while still flagging a higher probability of further cuts given the bank's signaling. The finance minister says room exists. The bank's own statement, the dot on the inflation projection, and the bulk of analyst commentary point the other way. Read the dissent before you read the headline.

The trade-off for your portfolio

If you hold Brazilian sovereign debt or run BRL carry, a higher-for-longer Selic is a yield-rich but high-conviction bet. You are being paid 14.25% to wait. But duration exposure in that environment carries asymmetric downside if the finance minister is right and easing resumes into rising inflation: real rates compress, the real weakens, and your capital return does the same. Meanwhile, the US picture is moving in the opposite direction. Per Yahoo Finance's coverage of the latest dot plot, almost half of FOMC members are now projecting at least one rate hike this year, and new Fed chair Kevin Warsh held rates unchanged at his first news conference. A US tightening bias stacked against a Brazil cutting bias is a textbook rate divergence. It is the only trade setup in this story with a quantifiable edge.

Three positions are available to you. You trust the finance minister and position for continued easing — accepting the inflation risk and the currency exposure that comes with a central bank cutting into rising prints. You trust the Copom statement and the analyst consensus, lock in the 14.25% yield on offer now, and wait for the data. Or you do nothing and let the opportunity cost compound against you. Two of these have a thesis. The third is indecision wearing a portfolio.