Brazil softens Selic rate but concerns grow about fiscal stimulus on election year and impact of El Niño

Thursday, June 18th 2026 - 17:53 UTC

Inflation expectations have risen steadily as President Lula da Silva rolls out measures boosting household spending as he bids for re-election in October

Brazil’s central bank interest rate-setting committee, Copom, ‌unanimously voted on Wednesday to lower its benchmark Selic rate by 25 basis points to 14.25%, a level last seen in May 2025, ‌but acknowledging a tougher inflation outlook given the risks from election-year fiscal stimulus and the impact of a likely El Nino weather pattern shock.

Copom said in its policy statement…”it reaffirms that the total magnitude of the calibration cycle will be established in light of new information“. The decision comes as economists scale back expectations for easing this year amid an oil price shock linked to the U.S.-Israeli war with Iran.

Inflation expectations have risen steadily as President Lula da Silva rolls out measures boosting household spending as he bids for re-election in October.