Standard Chartered’s Dan Pan expects Brazil’s central bank, Banco Central do Brasil (BCB) to deliver a more gradual easing cycle as inflation dynamics remain challenging. Pan now forecasts the Selic rate to pause in Q3 before renewed cuts in Q4-2026, with policy rates seen at 13.75% by end-2026 and 11.75% by end-2027, both higher than previously projected.

BCB seen pausing before renewed cuts

"We now expect a more gradual easing cycle from Banco Central do Brasil (BCB) given the increasingly challenging inflation scenario."

"Rising inflation expectations, stubborn core inflation and surprisingly resilient domestic demand suggest that room for near-term rate cuts has diminished."

"Falling energy costs, slowing demand, and easing election-related market volatility after the October 2026 elections should reopen the door for rate cuts in Q4-2026 and 2027."

"We now see higher year-end policy rates of 13.75% (12.5% prior) for 2026 and 11.75% (10.0%) for 2027."

"BCB cut rates by 25bps on 17 June."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)