The Brazilian Central Bank delivered a Copom ata hawkish in tone on Tuesday, May 5, 2026, warning that the duration of the Iran-United States conflict could force the Comitê de Política Monetária to slow or pause the easing cycle that lowered the Selic policy rate by 25 basis points to 14.50 percent on April 29.
The Central Bank lifted its inflation projection for the relevant horizon, the fourth quarter of 2027, from 3.3 to 3.5 percent, while the 2026 forecast stands at 4.6 percent against a Focus survey median of 4.86 percent. Brent crude traded between 110 and 114 dollars per barrel during the meeting window, well above the institution’s prior 80 dollar baseline.
Key Points
— Copom unanimously cut the Selic by 25 basis points to 14.50 percent on April 29, 2026, the second consecutive 25 basis-point reduction.
— The minutes raised the Central Bank’s IPCA forecast for the fourth quarter of 2027 from 3.3 to 3.5 percent.
— Brent crude near 114 dollars per barrel and the Hormuz disruption are flagged as the dominant risk to the inflation path.
— Banco do Brasil signalled it will revise its 12.50 percent year-end Selic forecast and its 80 dollar oil baseline upward this month.
— Suno Research expects the cut cycle to be shorter than the market priced before the war started in February 2026.
What the Minutes Said
The Rio Times, the Latin American financial news outlet, reports that the Copom flagged a balance of risks “more elevated than usual” for the inflation path, dominated by the Middle East conflict and its consequences for global supply chains and commodity prices. The committee also pointed to downside risks from a sharper-than-expected slowdown in domestic and global activity and from a fall in commodity prices, but the overall tone leaned hawkish relative to the post-meeting communiqué of April 29.
The Central Bank wrote that the prolongation of the conflict could produce more lasting effects on global production chains, with part of those effects already visible in worsening inflation expectations for 2028. The minutes added that, given that additional dis-anchoring, the BC will have less room for monetary easing in the post-conflict period and that the cut cycle is likely to be shorter than the market expected before the war.
Forecast Revisions
For the relevant horizon, the fourth quarter of 2027, the Copom now projects an inflation of 3.5 percent. The 2026 reference is 4.6 percent, against a Focus median of 4.86 percent and an official continuous target of 3 percent with a 1.5 percentage-point tolerance band, which therefore puts both projections above the official ceiling of 4.5 percent.
Why It Matters for Markets
Brazilian assets responded constructively despite the hawkish tone. The Ibovespa closed at 186,753.82 points on May 5, up 0.62 percent on the day, while the dollar slid 1.12 percent to 4.9123 reais, the lowest since January 26, 2024, with the year-to-date depreciation of the US currency against the real reaching 10.51 percent. Carry-trade flows from low-yielding currencies remain a structural support for the real while the Selic stays restrictive at 14.50 percent.
Banco do Brasil chief economist Marcelo Rebelo said the team will revise the 80 dollar Brent baseline upward and may also lift the 12.50 percent year-end Selic projection. Suno Research summarised the move as a hawkish reading: “The minutes were tougher than the communiqué and prepare ground for a strategy revision,” the firm said in a note.
| Indicator | Value |
|---|---|
| Selic rate (post April 29 cut) | 14.50% |
| IPCA forecast 4Q27 (relevant horizon) | 3.5% (was 3.3%) |
| IPCA forecast 4Q26 | 4.6% |
| Focus median 2026 IPCA | 4.86% |
| Tolerance band ceiling | 4.5% |
| Brent reference vs BC baseline | ~USD 114 vs USD 80 |
| USD/BRL close, May 5 | 4.9123 (-1.12%) |
How the Minutes Reframe the Cycle
A month ago, the Focus survey expected a Selic of 12.50 percent at the end of 2026, implying 200 basis points of additional easing. After the April 29 minutes, that median climbed to 13 percent, narrowing the cut path to roughly 150 basis points. The Copom also said that fiscal credibility and the trajectory of the public-debt ratio remain integral to the inflation outlook, a reminder relevant for an economy with public debt at 80.1 percent of GDP in March 2026.
For foreign investors, the hawkish tilt sustains the carry-trade rationale that powered the real this year, even as it limits the room for further multiple expansion in Brazilian equities. The Ibovespa hit fresh all-time highs across January and February 2026, with foreign net inflows of about 26.3 billion reais (around 5.21 billion dollars) in January alone.
Connected Coverage
For broader context, see our coverage of Goldman Sachs Latin America inflation forecasts amid the Brent oil shock and our analysis of the Brazilian Desenrola 2.0 household debt programme.
What Happens Next
- Mid-May 2026: Banco do Brasil research team meets to revise its 80 dollar Brent and 12.50 percent year-end Selic projections.
- June 17 to 18, 2026: The next Copom meeting will calibrate the pace of further easing against incoming inflation and oil data.
- Iran-United States ceasefire: Trajectory of the truce and Strait of Hormuz transit, currently restricted, will determine the Brent reset.
Frequently Asked Questions
Why is the Copom ata hawkish for the May 2026 cycle?
The Copom ata hawkish reading rests on three signals released on May 5, 2026: a higher 4Q27 inflation forecast at 3.5 percent versus 3.3 percent, an explicit warning that the cut cycle will be shorter than the market priced before February 2026, and a balance of risks tilted to the upside on Iran-related shocks. Brent at 114 dollars against the 80 dollar baseline is the binding constraint identified by the committee.
What is the current Brazilian Selic policy rate?
The Selic policy rate is 14.50 percent a year following the unanimous 25 basis-point cut on April 29, 2026, the second consecutive 25 basis-point reduction after a March move of the same size. The accumulated easing reaches 50 basis points from the cycle peak, leaving the rate clearly restrictive. Focus survey participants now expect a year-end Selic of 13 percent, up from 12.50 percent a month earlier.
How does the Iran war affect Brazilian inflation?
The Iran war pushed Brent crude to roughly 114 dollars per barrel during the Copom meeting window, against the Central Bank‘s prior 80 dollar baseline. The shock feeds into Brazilian inflation through gasoline, diesel, freight and aviation fuel, which Petrobras already raised by 18 percent on May 1. The committee also flagged second-round effects on global supply chains, which the minutes describe as a more lasting source of inflation pressure into 2028.
When does the Copom meet next?
The next Copom meeting is scheduled for June 17 and 18, 2026. The committee will assess incoming IPCA prints, fiscal data, the trajectory of Brent crude, and signals from the Iran-United States ceasefire. The market currently expects a further 25 basis-point cut, taking the Selic to 14.25 percent, although the hawkish ata raises the probability of a hold if the oil shock persists.
Updated: 2026-05-06T08:05:00Z by Rio Times Editorial Desk