Business · Markets · 22 hrs ago
Election outcome leads Daycoval to expect pause in Brazil rate cuts
Economist Julio Cesar Barros said Daycoval now expects Brazil’s central bank to pause rate cuts at its meeting, rather than continue lowering the Selic rate.
The bank had previously expected another cut, but changed its view after inflation forecasts worsened, especially for 2028 and 2029.
Barros said the election outcome put pressure on interest rates and the currency, amid concern about the lack of clear plans for reducing government spending.
A weaker currency can add to inflation pressures, while high oil prices and weather patterns could push up fuel and food costs.
The Selic was expected to remain at 13.75% a year, but the story does not confirm the central bank’s decision.
Daycoval expects rate cuts could resume later if risks ease and there is progress on fiscal policy.
Banco Daycoval changed its forecast and expects Brazil’s Selic rate to remain at 13.75% at the Central Bank’s meeting.
Economist Julio Cesar Barros said the election result put significant pressure on the interest-rate curve and changed the bank’s outlook.
The bank had previously expected the cycle of rate cuts to continue, with at least one more cut.
Worsening inflation expectations, fiscal concerns and risks to food and oil prices contributed to the revised forecast.
Daycoval said rate cuts could resume later if risks ease and there is progress on fiscal issues.
- Who
- Banco Daycoval and its economist Julio Cesar Barros.
- What
- Daycoval expects the Central Bank to pause cuts to the Selic rate.
- When
- At the Central Bank’s meeting described in the article as taking place that day.
- Where
- Brazil.
- Why
- The election result, worsening inflation expectations, fiscal concerns and risks to oil and food prices made the outlook more adverse for further rate cuts.
This story does not have two clearly opposing sides.
Daycoval still expected the cycle of interest-rate cuts to continue.
Daycoval revised its forecast after inflation expectations deteriorated, especially for 2028 and 2029.
Daycoval expected the Selic rate to remain unchanged.
- Selic rate
- 13.75% per year
- Bank
- Banco Daycoval
- Economist
- Julio Cesar Barros
- Inflation outlook
- Expectations worsened particularly for 2028 and 2029
- External risk
- Conflict involving the United States and Iran was keeping oil prices high
What people are saying
We changed our expectation and now adopt the scenario of a pause in the Selic rate at today’s meeting.
It seems to me that the market’s interpretation is moving in the direction that some fiscal adjustment is needed.
With that, there could be a somewhat lower interest rate next year.