Brazil's rate setters used their Sept. 16 meeting to shave the benchmark Selic to 13.75%, a quarter-point move that made it five cuts in a row and set cumulative easing at 125 basis points since March. The minutes, published Tuesday and signed by board members led by Gabriel Galípolo, stress that the pace of any further easing will hinge on how fresh data shape the outlook. Officials also made clear that, while policy has helped cool prices, inflation pressures remain tied to demand, so monetary settings need to stay restrictive for now.
Since the previous meeting, officials saw signs of a gradual slowdown in activity, most visibly in sectors that swing more with the cycle, even as the broader economy still shows resilience and the labor market remains tight. The central bank's own gauge showed overall activity slipped 0.22% in July from June, the second monthly decline in a row. Formal hiring also lost steam, with 58,568 new jobs created in July - the weakest monthly tally so far this year.
Credit is part of that story too. The minutes point to slower growth in lending, and say freely allocated bank credit is lining up with a decelerating economy under restrictive policy.
Price readings have improved: headline inflation and the mean of core gauges have both come down. Year-over-year inflation registered 4.22% in August, coming in under the 4.27% median estimate from a Bloomberg survey, yet remaining above the 3% target. Even so, the minutes note that inflation expectations remain above the goal "in all horizons," and the bank's current forecast puts annual inflation at 3.2% during the first quarter of 2028 - its relevant policy horizon.
The minutes say supply shocks account for much of the movement in recent inflation readings and the projected path. The central bank says it should not react to the initial hit from such shocks, but it will keep a close eye on whether those pressures broaden. If they do, officials said they would "react decisively."
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With the first round of Brazil's presidential election set for Oct. 4 and a likely runoff three weeks later, investors are zeroed in on what the candidates might do about rising public debt and government spending. A worsening view of the fiscal outlook could sap the real and feed inflation, complicating the bank's job. Beyond politics, global risks are stacking up: the Iran war is keeping oil prices volatile, El Niño threatens to push up food costs, and tighter US policy has lifted the dollar, another potential inflation channel for Brazil.
Bloomberg Economics read the minutes as steady-handed on credit markets, interpreting the rise in delinquencies and slower loan growth as evidence monetary policy is doing what it is supposed to do. Their baseline envisions quarter-point reductions in each of the last two meetings of the year, assuming election-season market moves don't upend the outlook. Closer to home, a weekly central bank survey published Monday shows economists expecting one more cut this year, which would take the Selic to 13.5% by December.
The through-line here is caution. The central bank is easing, but it is keeping one eye on demand-driven inflation and another on fiscal signals, all into a tight election calendar. That cocktail can mean choppier moves in local assets as data and headlines roll in. If you have exposure to Brazil, watch the election narrative, inflation prints, and credit trends - that is where the next policy hints will show up.
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