
Despite tensions surrounding the war in the Middle East, Brazil’s Central Bank cut interest rates for the second time in a row. The Monetary Policy Committee (Copom) unanimously reduced the Selic rate, the economy’s benchmark interest rate, by 0.25 percentage points to 14.5 percent per year.


From June 2025 to March of this year, the rate stood at 15 percent per year, the highest level in nearly 20 years. At its last meeting, Copom cut interest rates again amid falling inflation. However, the war in the Middle East, which has led to higher fuel and food prices, complicates the committee’s work.
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In a statement, the committee gave no indication of the future path of interest rates. It noted that it is monitoring the war in the Middle East and the effects of a possible prolongation on inflation.
Inflation
The Selic rate is the Central Bank’s primary tool for keeping inflation under control, as measured by the Broad National Consumer Price Index (IPCA).
The inflation target set by the National Monetary Council for the Central Bank to pursue is 3 percent, with a tolerance band of 1.5 percentage points above or below.
In the latest Monetary Policy Report, released at the end of March, the Central Bank raised its forecast for the IPCA in 2026 from 3.5 percent to 3.6 percent.
The benchmark interest rate is used in government bond trading within the Special Settlement and Custody System (Selic) and serves as a reference for other interest rates in the economy. By raising it, the Central Bank curbs excess demand that puts upward pressure on prices, as higher interest rates make credit more expensive and encourage saving.