Copom should close the year with Selic at 15%, without committing to starting the cycle of cuts

Summary
Copom should maintain the Selic rate at 15% at the last meeting of the year, without committing to reductions, which the market expects to only start in 2026, depending on economic developments.

The Monetary Policy Committee (Copom) of the Central Bank (BC) will announce late in the afternoon of this Wednesday 10, the new Selic rate, the base interest rate of the Brazilian economy. For the financial market, analysts unanimously expect interest rates to be maintained at 15% per year. Doubts, however, center around when British Columbia will begin to reduce that rate, known as the start of the cutting cycle.

For Banco Itaú, the statement should emphasize the need for patience and serenity, with the next steps being conditioned by the evolution of activity data, inflation, expectations and projections. “For the next steps, signals must remain flexible, without explicit commitment to the start of the cycle of reductions, but recognizing that adjustments can be made as the scenario evolves. »

Although he does not expect such a clear signal from Copom, Itaú maintains his expectation that the cycle of cuts will begin in January 2026, with a reduction of 0.25 percentage points (pp). For this to happen, however, the institution affirms that it will be important for the commission to adjust the communication of this last meeting of the year, removing the section that says that “it will not hesitate to resume the adjustment cycle, if it deems it appropriate.”

The Brazilian Association of Financial Entities and Capital Market (Anbima) also estimates that the rate will be maintained at this last meeting and will only begin to fall in January, with a drop of 0.25 percentage points.

This same position and optimism is shared by Warren Investimentos, who sees the cycle starting with an initial cut of 0.25 at the January meeting, followed by subsequent cuts between 0.25 and 0.50 and ending the year with the Selic at 12.25%.

“We do not expect any explicit message on the next decisions, according to the model adopted in the latest statements,” estimates Luis Felipe Vital, chief Macro and Public Debt strategist at Warren Investimentos. “But, by recognizing the positive evolution of the scenario based on the moderation of activity and inflation and emphasizing its data-dependent nature, the BC must pave the way for possible flexibility at the January 2026 meeting,” he adds.

Less optimistic scenario

For the less optimistic part of the market, Copom should maintain the Selic at 15% this Wednesday, but it is expected that the Central Bank will only begin a cycle of cuts at the end of the 1st quarter of 2026, that is to say in March.

As the latest edition of the Focus Bulletin shows, economists consulted by the Central Bank raised their base interest rate projections to the end of 2026 and began to see the rate holding steady in January. For the end of 2026, the projection increases from 12% to 12.25% per year. For the end of 2027, the market projection remained at 10.50% per year.

BC data shows that the adjustment of the Selic projections, indicating the expectation of a more cautious BC in 2026, took place mainly on Friday 5, when Brazilian assets suffered heavy losses following the announcement that former President Jair Bolsonaro (PL) had decided to support the candidacy of his son Flávio Bolsonaro (PL-RJ) for the presidency.

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