Copom Minutes Say Brazil Inflation Is Still Driven by Demand
Brazil · Economy
Key Facts
- —What happened Brazil’s central bank published Copom minutes on 22 September 2026 explaining last week’s cut in the Selic rate to 13.75%.
- —The key message Inflation is “still being driven by demand,” so monetary policy must stay tight, the rate-setting committee wrote.
- —The fiscal warning Weaker fiscal discipline and reform efforts could raise Brazil’s neutral interest rate, the committee repeated from its August minutes.
- —The catch The committee gave no guidance on the size of any move at its next meeting, on 3 and 4 November 2026.
- —The forecasts The central bank sees 5.2% inflation in 2026 and 3.2% in early 2028, still above its 3% target.
- —How traders reacted Short-dated interest-rate futures held steady after the release while longer contracts edged higher, Agência Estado reported.
Brazil’s central bank cut interest rates last week, but it is moving slowly. The Copom minutes blame demand for inflation and repeat a warning about fiscal discipline.
Brazil’s central bank used its Copom minutes on Tuesday 22 September 2026 to insist that inflation is still driven by demand. It also repeated a warning that looser fiscal discipline could push up the country’s neutral interest rate.
The minutes cover the 15 and 16 September meeting of the Monetary Policy Committee, or Copom, which sets the Selic rate. At that meeting the committee cut the Selic by a quarter point, from 14% to 13.75% a year.
It was the fifth quarter-point cut in a row, leaving the Selic 1.25 points below the 15% held until March 2026. The minutes explain why the Banco Central do Brasil is still moving slowly.
Demand still drives prices, the committee says
The core message came in one short passage. Inflation “is still being driven by demand, requiring monetary policy to remain tight,” the committee wrote.
It also credited its own work, saying monetary policy has played “a decisive role in the disinflation process”. Evidence that high rates are cooling activity has been “gradually accumulating,” it added.
That wording is not new. The same sentences appeared in the minutes of the August meeting, when the Selic was cut to 14%.
A repeated warning on public finances
Copom again linked fiscal policy to the cost of fighting inflation. It cited a slowdown in “structural reform efforts and fiscal discipline,” rising earmarked credit and doubts over stabilising public debt.
Those factors “have the potential to raise the economy’s neutral interest rate,” the minutes said. The neutral rate is the level that neither stimulates nor restrains the economy.
A higher neutral rate would weaken the effect of any given Selic level. The committee said that would make disinflation more costly in lost economic activity.
Earmarked credit means loans steered by government rules or programmes, such as housing finance. Such loans are less sensitive to the Selic, so their growth dulls the central bank’s main tool.
The committee closed the passage with a call for “harmonious fiscal and monetary policies”. It said policies must be “predictable, credible, and countercyclical”.
The Portuguese original speaks of the “esmorecimento”, or weakening, of reform efforts and fiscal discipline. The minutes named no government official and no specific spending measure.
What changed since August
Most of the new material concerns the data. Headline inflation has now joined core measures below the upper limit of the tolerance band, though both remain above target.
Brazil’s inflation target, set by the National Monetary Council, is 3% for 12-month consumer inflation. A tolerance band of 1.5 percentage points either side puts the upper limit at 4.5%.
Second-quarter GDP figures confirmed a slowdown concentrated in the most cycle-sensitive parts of the economy, the committee said. Unemployment, however, remains at historically low levels.
A new paragraph on bank credit said longer-term loans outside government programmes are shrinking. Costlier short-term and emergency credit lines are still growing, though more slowly.
Producer prices moved the other way. The minutes said 12-month producer inflation accelerated for both intermediate and consumer goods.
Forecasts edge up, expectations stay high
The central bank’s own inflation forecast for 2026 rose to 5.2%, from 5.1% in August. Its 2027 forecast rose to 3.9%, from 3.8%.
For the first quarter of 2028, the horizon that now guides policy, the bank still projects 3.2%. That remains above the 3% target.
Private forecasters polled in the central bank’s weekly Focus survey expect 4.9% inflation in 2026 and 4.3% in 2027. The committee said expectations remain above target at every horizon.
The committee’s shared conclusion was blunt. With expectations unanchored, “greater monetary restriction is required for a longer period than would be otherwise appropriate.”
Room for more cuts, but no promise
The Copom minutes offer no explicit guidance for the next meeting, set for 3 and 4 November 2026. The committee said only that the size of the easing cycle depends on events.
“The magnitude of the calibration cycle will be adjusted in light of developments in the scenario,” the minutes said. The aim is to keep policy at a “contractionary level”.
That leaves further cuts possible without committing to any. Risks to inflation remain tilted upward, according to the committee.
It listed longer-lasting unanchored expectations, stubborn services inflation and a persistently weaker real among the upside risks. A sharper slowdown at home or abroad would pull the other way.
All seven committee members who voted, led by governor Gabriel Galípolo, backed the September cut. No dissent was recorded.
How traders reacted
Interest-rate futures barely moved at the short end after the release, the news agency Agência Estado reported. The January 2027 contract stood at 13.550% at 9:15 a.m. Brasília time (BRT), against 13.547% at Monday’s settlement.
Longer contracts rose alongside a firmer US dollar. The January 2031 contract traded at 13.960%, up from 13.912%, the agency said.
For foreign investors, the Copom minutes are steady rather than new. Brazil is easing slowly, and its central bank wants fiscal policy to help bring inflation down.
More: Brazil coverage, every day from The Rio Times.
Frequently Asked Questions
What are the Copom minutes?
Copom is the Monetary Policy Committee of the Banco Central do Brasil, Brazil’s central bank. Chaired by governor Gabriel Galípolo, it meets eight times a year to set the Selic, the benchmark interest rate. It usually publishes minutes of each meeting on the following Tuesday, in Portuguese and in an English version. The Portuguese text prevails if the two differ.
What is the neutral interest rate?
It is the interest rate at which monetary policy neither speeds up nor slows down the economy. It cannot be observed directly and must be estimated. The committee says weaker fiscal discipline, slower reforms, more earmarked credit and doubts over public debt could push it higher. That would mean the Selic has to stay higher to have the same cooling effect.
Did the minutes signal more rate cuts?
Not explicitly. The Copom minutes follow a cut in the Selic to 13.75% on 16 September 2026, the fifth quarter-point cut in a row. The minutes say the size of the easing cycle will be adjusted as the scenario develops, keeping policy contractionary. They give no guidance on the next move.
When does Copom meet next?
The next meeting is scheduled for Tuesday 3 and Wednesday 4 November 2026, according to the calendar the central bank published for 2026. The last meeting of the year is set for 8 and 9 December 2026.
Sources: Banco Central do Brasil, official English minutes of the 281st Copom meeting, Banco Central do Brasil, Portuguese minutes (ata) of the 281st meeting, Banco Central do Brasil, minutes of the 280th meeting in August, Agência Estado via Diário do Grande ABC on interest-rate futures, Agência Estado on the fiscal passage, Exame on the minutes, CNN Brasil on the 2026 Copom calendar, Banco Central do Brasil on the inflation target
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