The high Selic rate - the economy’s basic interest rate - was the main reason for industrial stagnation in Brazil at the end of 2025, the National Confederation of Industry (CNI) said, commenting on the Monthly Industrial Survey released Tuesday (Feb. 3) by the Brazilian statistics agency IBGE.

According to the entity, the cycle of high interest rates, currently at 15 percent per year, has made credit more expensive and dampened consumer appetite. The situation has been worsened by weak domestic demand and rising imports, which captured a significant share of the Brazilian market, the CNI argues.

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Mário Sérgio Telles, Director of Economics at CNI, described the damage caused by interest rates as “enormous.”

“The punitive level of the Selic rate has made credit more expensive for the productive sector, holding back investments, and has reduced consumer appetite for industrial products. The damage caused by high interest rates is enormous. In 2024, with a lower Selic rate, domestic demand for manufacturing goods grew four times faster than the demand recorded up to November 2025,” Telles emphasized in a statement.

This weakening, the CNI director highlighted, led to higher-than-planned inventories and a 0.2 percent decline in manufacturing output, which involves converting raw materials into consumer goods.

The confederation’s analysis also warns of external pressure: purchases of consumer goods abroad jumped 15.6 percent last year. While national industry slowed, imported products filled the gaps, hindering any attempt at recovery by local businesses throughout both semesters of 2025.

Decline in confidence

This combined effect severely impacted the Industrial Entrepreneur Confidence Index (ICEI), released at the end of January, which recorded its worst January performance in ten years. With the indicator below 50 points - the threshold separating optimism from pessimism - for 13 consecutive months, the National Confederation of Industry diagnoses a persistent lack of confidence, which is paralyzing essential investments in the modernization and expansion of Brazilian factories.

According to CNI, without a change in interest rate policy and measures to stimulate domestic demand, this year’s growth is at risk. The organization warns that continued productive inertia and weak hiring intentions could harm not only the manufacturing industry but the performance of the entire national economy in the short term.

The IBGE survey confirmed the sector’s loss of momentum. Industrial production ended 2025 with growth of just 0.6 percent, a modest result compared with the 3.1 percent expansion recorded in 2024. The official survey notes that the slowdown intensified in the second half of the year, coinciding with monetary tightening.

Despite the decline in inflation and the dollar, Brazil’s Central Bank left interest rates unchanged. The Monetary Policy Committee (Copom) unanimously maintained the Selic rate, the economy’s basic interest rate, at 15 percent per year.

This is the fifth consecutive meeting at which Copom has maintained the basic interest rate. The rate is at its highest level since July 2006, when it stood at 15.25 percent per year.

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In its statement, Copom signaled that it may begin to reduce interest rates at the March meeting, provided inflation remains under control and there are no surprises in the economic scenario.

“The Committee anticipates that, if the expected scenario is confirmed, it will begin easing monetary policy at its next meeting, but reiterates that it will maintain the appropriate restraint to ensure inflation converges to the target,” the Central Bank stated.

The Selic rate reached 15 percent per year at the June meeting last year and has remained at that level since.

Inflation

The Selic rate is the Central Bank’s main tool for curbing Brazil’s official inflation, as gauged by broad consumer price index IPCA. In 2025, the indicator stood at 4.26 percent, the lowest annual level since 2018. With this result, it returned to within the ceiling of the continuous inflation target.

Under the new continuous target system, in effect since January, the inflation target pursued by the Central Bank and defined by the National Monetary Council is 3 percent, with a tolerance range of 1.5 percentage points above or below. In other words, the lower limit is 1.5 percent and the upper limit is 4.5 percent.

In the continuous inflation targeting model, the target is calculated month by month, taking into account inflation built up over 12 months. In January 2026, inflation since February 2025 is compared with the target and the tolerance range. In February 2026, the procedure is repeated, with calculations starting in March 2025. In this way, the verification shifts over time and is no longer restricted to the December index of each year.