Published Wednesday, 28 October, 8:55 a.m. ET · Source: Banco Central do Brasil (the central bank), B3 (São Paulo’s stock exchange), Polymarket and Rio Times market data
Key Facts
- The rate. Brazil’s Selic benchmark rate is 13.75%, unchanged since its 16 September cut.
- The currency. The dollar buys about R$5.35, against R$4.98 on the Friday before the election runoff.
- The risk. A weaker real lifts import prices, which can force the central bank to pause its rate cuts.
- Next. The central bank announces its decision on Wednesday 4 November, around 4:30 p.m. ET.
- Prediction markets. Polymarket, a prediction market, puts a hold on 4 November at 68.0% and a cut at 26.5% (8:45 a.m. ET).
Brazil’s election is over, but its currency is still sending the central bank a message: slow down. The dollar jumped more than 8% against the real on Monday after President Lula’s re-election, and traders now doubt that interest rate cuts will continue.
That matters to US investors because the Selic, the central bank’s key rate, steers the yield on Brazilian bonds and the value of the Brazilian real. It stands at 13.75% a year, as explained in our guide to the Selic, after five straight quarter-point cuts this year.
The next decision, on 4 November, is the first test for the Brazil economy since the vote. It will show how the bank weighs the weaker real against inflation.
In Plain English
Selic: the interest rate set by Brazil’s central bank, like the Fed’s rate in the United States.
Real: Brazil’s currency. A weaker real means each dollar buys more of it.
Why a Weak Real Can Freeze Rate Cuts
Think of the Selic as the price of money in Brazil. Cutting it makes loans cheaper, but it also makes Brazilian bonds less attractive to foreign investors, which can weigh on the real.
A weaker real hurts prices at home, because Brazil buys fuel, fertiliser and electronics priced in dollars. If those costs reach shop shelves, the central bank has less room to cut.
How Far the Dollar Has Moved
On Friday the dollar closed near R$4.98. On Monday, the first trading day after President Luiz Inácio Lula da Silva beat Senator Flávio Bolsonaro, son of former president Jair Bolsonaro, in Sunday’s runoff, it closed near R$5.42.
It eased to about R$5.35 on Tuesday and was little changed on Wednesday morning. That is still roughly 7% above its level before the vote.
Who Decides, and When
The decision belongs to Copom, the central bank’s Monetary Policy Committee, led by central bank president Gabriel Galípolo. It meets eight times a year and announces the rate on the evening of its second day.
On 16 September the committee voted unanimously for a quarter-point cut, to 13.75%. The 3–4 November meeting is its first since the election.
What Traders and Economists Now Expect
Before the vote, many investors expected the central bank to keep trimming the Selic. That view has faded, and several Brazilian economists now talk of a pause.
Their reasoning is simple: a weaker currency pushes up inflation expectations, so the bank has little reason to hurry. Inflation expectations are what households and companies think prices will do over the coming year.
What Prediction Markets Say
On Polymarket, a crypto-based prediction market, traders put a Selic hold on 4 November at 68.0% and a quarter-point cut at 26.5%. A quarter-point rise is priced at 2.5%, and about US$112,000 has been traded on the market.
For the December meeting, “no change” stands at 46.5%, a cut at 29.0% and a rise of some size at 22.2%. Prices are bets, not polls, and are from 28 October, 8:45 a.m. ET.
Why we show this: prediction markets turn real-money bets into a live probability that moves within minutes of the news, which is why investors, campaigns and newsrooms in the United States now follow them closely. We show them next to polls and official results, never instead of them.
What It Means for US Readers
Holders of the EWZ exchange-traded fund, which tracks Brazilian shares, and of Brazilian shares such as Petrobras (PBR, the oil company) and Itaú (ITUB, a large bank), feel both the rate and the currency. A weak real trims dollar returns even when share prices hold.
Travellers get more for their money: R$1,000 now costs about US$187, against about US$201 on Friday. Dollar earners living in Brazil gain purchasing power, while anyone paid in reais loses some.
What Is Not Known
Nobody knows yet whether the committee will hold or cut on 4 November, because the choice rests on inflation data and the government’s fiscal plan. The central bank will explain its choice in a statement that evening.
We will update when the decision lands. For earlier coverage, see our reports on the real’s recovery after the election and on the central bank’s stance on the currency.
Frequently Asked Questions
Will Brazil cut interest rates in November?
Nobody knows yet. Polymarket traders see a hold as most likely, at 68.0%, but the central bank decides on 4 November.
Why does a weaker real matter for interest rates?
It makes imports more expensive, which can push inflation up. The central bank may then keep rates high for longer.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief
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