The Copom (Monetary Policy Committee) should end the year 2025 with a base interest rate set at 15% per year, despite the poor performance of the GDP (Gross Domestic Product), but soften its speech and leave room for a reduction in the Selic in 2026. This is the expectation of the economists heard by the Leaf on the eve of the last meeting of the year.
While maintaining the rate at the current level is the unanimous projection of economic agents for the decision next Wednesday (10), bets on the start of the cycle of lowering interest rates are shared between January and March of next year.
If expectations are confirmed, new criticism from members of the government of Luiz Inácio Lula da Silva (PT) and businessmen should reach British Columbia.
For Minister Fernando Haddad (Finance), the current level of the Selic – the highest level in almost two decades – is not sustainable and the current moment would make it possible to reduce the base rate. Haddad’s speech echoes the pressure exerted by Lula, responsible for the appointment of Gabriel Galípolo as head of the municipality.
For Luiz Fernando Figueiredo, former director of the BC and chairman of the board of directors of Jive Investments, the most likely scenario today is that the Selic reduction will begin at the beginning of 2026. The trend, according to him, is that the communication of this meeting is already going in this direction.
One of the main factors of this strategy, according to the economist, is the scenario of slowing economic activity. According to data released by the IBGE (Brazilian Institute of Geography and Statistics), Brazil’s GDP increased by 0.1% in the third quarter of this year compared to the previous three months.
He emphasizes that by maintaining the Selic rate at 15% per year throughout the second half of the year, the monetary authority attempted to slow down economic activity to control inflation, to the extent that more contained demand tends to reduce pressure on prices.
“In fact, the economy, especially the part most sensitive to interest rates, is more moderate,” says Figueiredo, emphasizing that the services sector has demonstrated stability.
The former BC director believes that it is possible to reduce interest until the middle of next year. “As the elections approach, the ideal is that the Central Bank does not have to do anything. This way it causes less turbulence and less interpretation as to whether it helps or hinders (the government candidate),” he says.
Rafaela Vitória, chief economist of Interbank, believes that the time has come for Copom to soften its tone and stop postponing the discussion on interest reduction. According to her, there has been a significant improvement in the inflation scenario in recent weeks, which will allow the BC board to begin the easing process in January.
Since the previous meeting in November, the inflation projection collected by the Focus bulletin for this year has fallen within the target ceiling, at 4.43%. For 2026, the estimate decreased slightly from 4.2% to 4.17%, and for 2027 it remained at 3.8%.
Due to the lagged effects of interest rate policy on the economy, British Columbia is making decisions based on the second quarter of 2027.
The objective pursued by the BC is 3%, with a margin of tolerance of around 1.5 percentage points. In the rolling target model, the target is considered missed when accumulated inflation remains outside this margin for six consecutive months, which ranges from 1.5% (floor) to 4.5% (ceiling). The first explosion of the new format occurred in June.
“We saw a drop in expectations for 2025 and not so much for 2026. I think there is a conservatism in these revisions out of fear of the budgetary situation,” says Vitória. “This, to us, shows that it is possible for expectations to fall even further.”
In the market there is a debate about the apparent contradiction in the use of the expression “quite prolonged” in reference to the period during which Copom intends to maintain interest rates at the current level and the possibility of reducing the Selic rate from January. To shed some light on the discussion, Galípolo recently said that this time countdown does not reset at every collegial meeting.
“Even if it (Copom) starts to lower interest rates, you will still have monetary restrictions (interest rates at a level sufficient to contract the economy). So this prolonged period of monetary restrictions will continue,” says Inter’s chief economist.
For her, the ideal window for a relaxation of interest rates is in the first half of 2026. “We are going to enter an electoral scenario, with more volatility. Today (Friday 5), it is a good example, with the rise in the exchange rate. We could have some stress as a Copom meeting approaches. This could make cuts difficult,” she said.
The dollar closed Friday up 2.33%, quoted at R$5.434, after Senator Flávio Bolsonaro (PL-RJ) announced that he had been chosen by former President Jair Bolsonaro (PL) as candidate for President of the Republic in next year’s elections.
For Sergio Werlang, former director of the BC and professor of economics at the Brazilian School of Economics and Finance of the Fundação Getulio Vargas (FGV EPGE), the episode highlighted a risk that he predicted for 2026 by triggering a devaluation of the currency. As a result, he expects a more conservative position from Copom.
“This considerably delays the reduction in interest rates. They (Copom members) will delay it, more calmly, until January. There will be no way to lower interest rates now. And, even with the slowdown in the economy, this will encourage the Central Bank to be more cautious,” he says.
Before that, Werlang said that if he were a member of Copom, he would likely vote for an interest rate cut in December, given the effects already felt on economic activity.
The former BC director believes, however, that if the committee delays the start of Selic’s downward cycle too much, it will later be necessary to reduce spending more aggressively.
“If they maintain this reduction until March, they (Copom members) will have to reduce by 0.5 (percentage point) or 0.75 (pp),” he says.
“They could now prepare the ground for, at the next meeting, to make a reduction of 0.25 (ppl) or 0.5 (ppl), depending on the evolution of economic activity. If this slows down significantly, it would be recommended to reduce by more than 0.25 (ppl)”, he adds.
The economist Gustavo Rostelato, of Armor Capital, is among those who defend greater conservatism and project a reduction in interest rates from March 2026. In fact, he considers that inflation expectations will stagnate more in the last part of the year and that the seasonal deterioration of the dollar will not favor Copom’s estimates in the short term.
The lower GDP result is considered by him as a “yellow signal” for the conduct of interest rate policy, but Rostelato defends that Copom considers a broader set of information and does not react to a single piece of data.
As an example, he cites Brazil’s unemployment rate, which was 5.4% in the quarter ended in October, the lowest level in the historic series started in 2012. “There is room for resilience in this economic activity, even though the GDP data was, in fact, weaker,” he says.
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