Banco Central do Brasil — Policy Preview

Decision due: Wednesday 5 August, 18:30 -03 · Current Selic rate: 14.25%

1. Executive summary The Copom is expected to cut the Selic rate by 25bp to 14.00% tomorrow, in line with surveyed economist consensus. The single most important driver is the run of inflation prints since the June decision that have come in below expectations and shown clearer disinflation momentum. The key risk is that the statement places heavier weight on deanchored expectations, the July oil-price spike to 93.08 and resilient labour-market data, prompting a pause instead.

2. The call The Focus survey median and surveyed economist consensus both look for a 25bp cut to 14.00% at this meeting, with the year-end 2026 Selic median at 13.75%. We expect the same outcome and therefore agree with pricing. A further 25bp reduction would keep the calibration cycle that began in March on track; the last decision on 17 June delivered a unanimous 25bp cut to the current 14.25% level while stressing data dependence and the absence of any pre-committed path. The call would change only if the statement hardened materially from the June language on upside risks and the Governor’s 24 July remarks on the need for a prolonged restrictive period; absent that shift the recent inflation data support another step.

3. The committee The Copom publishes no member speeches; the Lean column is derived from each member's attributed voting record in the minutes. Only dissents differentiate members — a member who has always voted with the majority has revealed no individual stance.

The committee has been unanimous on the last four decisions. Since beginning the calibration cycle in March it has cut the Selic by 25bp at each meeting. Governor Galípolo’s 24 July remarks at Expert XP nevertheless introduced differentiation: he argued that the Selic should remain restrictive for longer than markets currently anticipate, citing persistently elevated inflation expectations, labour-market resilience and a still-solid economy. That tone sits above the dovish-leaning voting records of Picchetti, Santos and Teixeira and will be the pivotal input for tomorrow’s statement language. Recorded votes show no split at the June meeting; any fault line is therefore likely to appear in the minutes rather than the decision itself.

4. Data since the last decision

No new release since the last decision for: Real GDP growth (YoY), Real GDP growth (QoQ) — the committee sees the same print(s) it saw last time. Market rows are measured from the 17 Jun close — the last observation common to every market series on or before the last decision. WTI crude oil (USD/bbl) inter-meeting high 93.08 on 23 Jul (+15.4% from the decision close) — name the peak, not only the end-window delta.

Inflation data since the June decision have surprised consistently to the soft side. June IPCA fell 0.08pp to 4.64% and the July IPCA-15 dropped sharply to 4.52% year-over-year, with the month-on-month rate at only 0.06%. IGP-M printed even weaker. These moves pull the near-term trajectory toward the target. By contrast, labour-market prints have been firm: formal job creation beat consensus by 30k in June and the unemployment rate remains low. Activity indicators are more mixed—manufacturing PMI fell into contraction, industrial production missed expectations, and retail sales disappointed—yet the Q1 GDP figures the committee already possessed showed resilience. The real has weakened 1.2% and oil, although lower on the period, spiked to 93.08 in late July on supply concerns.

The outlook the Copom will set policy against therefore shows inflation still above the 4.5% ceiling at 4.64%, with 2026 Focus expectations at 5.03% signalling de-anchoring. Recent softer prints suggest the momentum is now bending toward the target over the next two to three quarters, but the level and the expectations gap remain the dominant concern. Activity is decelerating broadly in line with prior guidance while the labour market has yet to loosen; the latter is doing most of the work in keeping upside risks alive. On balance the inflation trajectory supports a further cautious cut, though the committee will want to see expectations begin to re-anchor before committing to additional steps.

5. What the committee has said Governor Galípolo’s remarks published 24 July are the most recent communication. He argued that the policy rate should remain restrictive for a prolonged period—longer than the market expects—citing inflation expectations that stay persistently above target, labour-market resilience and an economy that has proved more solid than anticipated.

The June statement judged that inflation and underlying measures had accelerated above target, with deanchored expectations and the 2027Q4 projection at 3.7%. Growth was seen as having accelerated in Q1 on the back of resilient labour markets but still consistent with a deceleration through 2026. Forward guidance stated that the easing cycle continues with a 50bp cut to 14.25%, yet the total magnitude will be data-dependent amid high uncertainty and no commitment to further easing. Risks were characterised as higher than usual and tilted toward the upside, including deanchored expectations, resilient services inflation and possible fiscal or exchange-rate pressures.

This language marked a shift from the April statement’s balanced risk assessment toward a clearer hawkish tilt on the balance of risks, even as the committee continued to cut. The March and January statements had similarly emphasised geopolitical uncertainty from the Middle East, de-anchoring and the need for a cautious, data-dependent calibration cycle. The statements have remained dovish in tone overall, but the substantive emphasis on upside risks and the absence of any pre-commitment has become more pronounced with each release.

6. Scenarios

7. Into the meeting The statement is likely to recognise the softer inflation prints while reiterating that expectations remain deanchored above target and that the policy stance must stay restrictive. Any revision to the June formulation on “elevated upside risks” and the “data-dependent” magnitude of further easing will be the immediate focus; the minutes due on 11 August will then supply the vote attribution and fuller discussion. With no press conference the communiqué language itself will set the initial market reaction, particularly the characterisation of the labour market and the oil-price spike.

Releases immediately after include the July trade balance on 6 August, the July IPCA year-over-year and month-over-month prints together with the minutes on 11 August, and August business confidence on 13 August. The July inflation data will be scrutinised for confirmation that the recent soft IPCA-15 reading is sustained.

Full analysis on the RoboMacro site → /central-banks/BCB