The Copom rate cut minutes released Tuesday reinforced what the market suspected after last week’s decision: Brazil’s central bank views its benchmark interest rate as deeply restrictive and intends to keep lowering it. The Rio Times, the Latin American financial news outlet, examines why economists now see the bar for pausing the easing cycle as remarkably high.
The committee cut the Selic from 15% to 14.75% on March 18 in a unanimous vote, the first reduction in nearly two years. Tuesday’s minutes revealed that the only internal debate was whether to start with a 0.25-point or 0.50-point move. A pause was never on the table.
War Clouds, but the Copom Rate Cut Path Holds
The minutes acknowledged that the Iran conflict and the Strait of Hormuz disruption have amplified uncertainty since January, with Brent crude trading near $100 a barrel. Yet the committee concluded those developments did not justify abandoning its easing signal, describing the current stance as “very restrictive.”
The Copom said the size and duration of its calibration cycle will be determined over time as new data arrives. Economists see asymmetry in that language: a significant worsening of the war would be needed to stop cuts, but even a modest improvement could accelerate them to 0.50 points.
Banks Bet on Faster Copom Rate Cut Pace
BTG Pactual described the minutes as dovish, noting the committee left the path open to accelerate to 0.50 points if geopolitical uncertainty recedes. Porto Asset’s chief economist argued that the threshold for interrupting the cycle is very high, and that only a sharp dislocation in oil or the exchange rate could force a pause.
Itaú Unibanco went further, calling the minutes consistent with an acceleration to 0.50 points at the April meeting. The bank highlighted a detail absent from the original communiqué: the Copom noted disinflation had lost momentum recently, but added that a possible reacceleration of activity would not significantly alter its outlook.
J.P. Morgan also expects deeper cuts ahead, noting that the central bank discussed inflation largely in the past tense, likely reflecting the war’s impact as already embedded in projections. The Focus survey now projects the Selic at 12.5% by year-end, implying roughly 225 basis points of additional cuts across the remaining six meetings.
Why the Copom Rate Cut Projection Surprised
One detail drew particular scrutiny. The committee’s inflation projection for the policy-relevant horizon came in at 3.3%, well below the market consensus of around 3.8%. The gap traces to an oil-price assumption: the Copom follows Brent futures for six months, then assumes a 2% annual increase thereafter.
That methodology produced a declining oil trajectory in the second half of 2026, offsetting the near-term inflation surge. BTG Pactual noted this approach pushed short-term projections higher but kept the medium-term forecast relatively contained.
The committee also flagged that inflation expectations, which had been falling before the conflict erupted, have since reversed course and risen above the 3% target across all horizons. It warned that the cost of disinflation rises considerably when expectations become unanchored.
What Comes Next
The next Copom meeting falls on April 28–29. If Brent retreats and expectations stabilize, a 0.50-point cut to 14.25% becomes the market’s base case. The committee will also absorb March inflation data and the quarterly Monetary Policy Report before deciding.
If the war escalates and oil pushes well above current levels, the committee could revert to 0.25 points or pause entirely. For now, the consensus tilts clearly toward continued easing, with the only debate being how fast Brazil can afford to go.