Copom Cuts Selic to 14.50% as Fed Holds in Powell’s Last

The Copom Selic cut and the Fed’s divided hold define a Super Wednesday that ends the Powell era and confirms Brazil is cautiously easing despite inflation running above target.

Brazil’s central bank cut the Selic rate to 14.50% on Wednesday evening while the Federal Reserve held US rates steady in what became Jerome Powell’s final act as chair. The Rio Times, the Latin American financial news outlet, reports that the Copom Selic cut was unanimous and widely expected, but the Fed’s 8-4 vote revealed the deepest internal divisions at the US central bank in more than three decades.

The divergence between the two central banks captures the asymmetric position of the global economy. Brazil is easing from extraordinarily tight levels while acknowledging that inflation remains above target. The United States is frozen in place, unable to cut because of war-driven energy inflation and unable to hike because the labor market does not warrant it.

What the Copom Selic Cut Means for Brazil

The 25-basis-point cut was the second consecutive reduction after the Selic had been held at 15% from June 2025 through February 2026. The Copom described the move as calibration rather than the beginning of an aggressive easing cycle. The committee cited persistent uncertainty from the Middle East conflict and its impact on global financial conditions.

The domestic inflation picture is uncomfortable. Focus survey expectations for 2026 IPCA stand at 4.9%, well above the 3% target and the 4.5% upper-tolerance ceiling.

Expectations for 2027 sit at 4.0%. The Copom acknowledged that both headline and core inflation have accelerated recently, distancing further from the target.

For markets, the unanimous vote and cautious tone suggest the June meeting is genuinely data-dependent. Most major desks — Santander, BofA, BTG, Warren — expect no forward guidance, meaning the next cut depends entirely on whether inflation data cooperates and whether the Hormuz situation stabilizes. Goldman Sachs has raised its year-end Selic forecast to 13.25%, implying a slower and shallower easing cycle than markets were pricing three months ago.

Powell’s Last Stand: The Most Divided Fed Since 1992

The Fed’s 8-4 vote was the most fractured since October 6, 1992. Stephen Miran dissented because he wanted a 25-basis-point cut.

Beth Hammack, Neel Kashkari, and Lorie Logan voted for a hold but objected to the statement’s inclusion of language suggesting further easing adjustments — they wanted a more hawkish posture.

Powell, in what he confirmed was his last press conference as chair, said he intends to remain on the Fed’s board of governors — his term runs until January 2028 — but pledged to maintain a low profile. He said his intention is not to interfere with his successor’s leadership.

Kevin Warsh, Trump’s pick to replace Powell, was confirmed by the Senate Banking Committee on a party-line 13-11 vote hours before the Fed decision. The full Senate vote is expected in May, positioning Warsh to chair the June 16-17 meeting. Warsh has signaled interest in cutting rates and reducing the Fed’s balance sheet, but the four-way split on the current board suggests he will inherit a committee far from consensus.

What This Means for the Real and Ibovespa

The combination of a Brazilian cut and a US hold is modestly negative for the real at the margin — it narrows the interest-rate differential that supports the carry trade. The dollar closed Tuesday at R$4.98, and the Ibovespa fell for a fifth consecutive session to 188,619 before the decisions were announced.

However, the Copom’s cautious tone — emphasizing that the cut was small precisely because conditions require caution — should limit any sell-off. Brazil still offers one of the highest real interest rates among major emerging markets, and the carry advantage remains substantial even at 14.50%.

The bigger variable is the Warsh transition. If the incoming Fed chair signals faster cuts at his first meeting in June, the dollar could weaken globally, supporting the real and easing imported inflation pressure on Brazil.

If Warsh maintains the current hawkish hold, the Copom’s room to continue cutting narrows further. The Powell era is over. The question for Latin American markets is whether the Warsh era brings relief or more of the same.