Brazil's Copom cuts Selic to 14.25%, but raises its inflation forecast

Summary

Banco Central Do Brasil's rate-setting [[Copom]] on 17 June 2026 voted unanimously to cut the benchmark Selic by 25 basis points to 14.25% — its third consecutive quarter-point cut — while striking a hawkish tone. May annual inflation ran at 4.72%, above the ceiling, and the bank raised its 2026 inflation projection to roughly 5.2% from 4.6%, flagging election-year fiscal stimulus and a likely El Niño as upside risks. Governor Gabriel Galipolo cited Middle East supply shocks. The easing arrives as Lula runs for a fourth term (see Lula leads Flávio Bolsonaro by double digits as the fourth-term campaign hardens) with the fiscal framework under scrutiny — a still-restrictive real rate even after the cut.

By the numbers

• 14.25% — new Selic policy rate, down 25bp.
• 3 — consecutive quarter-point cuts.
• 4.72% — May annual IPCA inflation, above the ceiling.
• ~5.2% — raised 2026 inflation forecast (from ~4.6%).

Why it matters

Brazil holds one of the world's highest real policy rates; the pace of cuts shapes credit, the real and the fiscal-debt path. A central bank easing while warning that the government's own election-year spending could reignite inflation exposes the tension between monetary and fiscal policy heading into the October vote.

What to watch

• Whether the next Copom continues 25bp cuts or pauses on the raised forecast.
• Monthly IPCA prints and any El Niño-driven food-price spike.
• Fiscal-framework signals and election-year stimulus.