MediumIV Macro Policy & Sovereign Debt16 September 2026, Wednesday

Brazil's central bank expected to cut the Selic from 14% to 13.75% at its last meeting before the 4 October elections

Copom met on 15–16 September; the market is pricing a 25 basis point cut, the fifth in a row. August saw monthly deflation of 0.32% and 12-month IPCA fell to 4.22%. The election race, meanwhile, is neck and neck.

The Monetary Policy Committee (Copom) of Brazil's central bank met on 15–16 September 2026. According to expectations compiled by Exame, the Selic rate is expected to be cut by 25 basis points from 14% to 13.75%, which would be the fifth consecutive cut. As the decision is due to be announced on the evening of 16 September Brasília time, the official statement was not available at the time of writing. In August IPCA fell 0.32% month on month; inflation stands at 3.11% year to date and 4.22% over the past 12 months. In the Focus survey, the 2026 IPCA expectation eased from 5% to 4.9%. The central bank expects IPCA of 3.2% for the first quarter of 2028, its policy horizon, which is above the 3% target. The market median keeps the year-end Selic forecast at 13.75%.

This is the last Copom meeting before the first round on 4 October. A possible run-off will be held on 25 October. In August polls compiled by The Rio Times, Lula leads Flávio Bolsonaro by 3–6 points in the first round; in the Datafolha poll of 18–20 August, by 39% to 33%. Run-off scenarios, however, are a statistical dead heat: 46% to 45% in Nexus. In an election in which about 156 million voters will cast ballots, the candidates diverge sharply on public spending and the size of the state. The rate path becoming uncertain after the election therefore keeps the risk premium alive for the real and longer-dated yields. The next Copom meetings are on 3–4 November and 8–9 December.

Talay assessment

Bottom line

Monthly deflation in August and falling inflation expectations give Copom grounds for the expected cut from 14% to 13.75% at its last meeting before the election; the decision statement had not yet been released when the record was written. The real uncertainty lies after the election: an IPCA forecast of 3.2% for 2028, still above target, and sharp divergence between candidates on fiscal policy tie the easing path to the election result. The most likely path is gradual easing with a cautious tone.

Likely effects

Brazilian credit conditionsPositive1–6 months
A fifth consecutive cut gradually lowers still-high real rates, easing borrowing costs for households and companies; the effect becomes visible over months.
Real and risk premiumNegativeWeeks
A neck-and-neck election and sharp divergence over public spending make the rate path uncertain after the vote, keeping the risk premium alive for the real and extended-maturity yields.
Emerging-market capital flowsUncertain1–6 months
Brazil cutting while the Fed stays tight narrows yield differentials among high-rate emerging markets, which may affect the direction of flows for countries such as Türkiye that appeal to a similar investor base.

Possibilities, ranked

1
Cautious gradual easing55%
Copom delivers the cut and, with cautious guidance, keeps a gradual step open for November; the cycle continues as the post-election fiscal framework becomes clearer.
Watch: Guidance in the Copom statement and the decision at the 3–4 November meeting
2
Post-election pause35%
The election outcome raises fiscal uncertainty and the real weakens; Copom pauses its cuts.
Watch: The real's performance after the 4 and 25 October votes and inflation expectations in the Focus survey
3
Faster cuts10%
Deflationary data persist, expectations approach target and the post-election fiscal framework inspires confidence; Copom enlarges its cuts.
Watch: A marked fall in 2026 IPCA expectations in the Focus survey and debate over larger cuts

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Bottom line

Likely effects

Possibilities, ranked

Sources