Interest rates at 15%: analysts expect a cut in the Selic rate only in 2026

The Monetary Policy Committee (Copom) unanimously decided to raise the Selic rate from 14.75% to 15% per year on Wednesday, the 18th.

In the statement , the Central Bank pointed out that this new increase is an interruption in the rise in interest rates, and that the rate should remain at this level “for a very long period”.

+ BC decides to raise interest rate to 15% and signals pause in Selic rate hike cycle

While on the one hand the rise in interest rates may have taken a break, on the other hand, the beginning of a decline is only on the market horizon for 2026.

“Inflation is resilient, above the target ceiling, which should keep interest rates at a high level for longer. The outlook is that the rate will only start to fall from 2026 onwards”, assesses Ricardo Serone, Financial and Investment Director at BB Previdência.

In May, inflation measured by the IPCA slowed compared to April, to an increase of 0.26%. However, in 2025, it is expected to rise by 2.75% and, in the last 12 months up to May, it rose by 5.32%, well above the Central Bank's target of 3%, as well as the ceiling of 4.5%. The reduction in food and fuel prices contributed to the drop in May.

“The Copom mentions signs of moderation in economic growth on the one hand, but also highlights the uncertainties in the conduct of fiscal policy, with pressures on the labor market and inflation projections still high. If we see a new increase in spending and an indication of a more expansive budget in 2026, the Copom may keep interest rates high for longer,” said Rafaela Vitoria, chief economist at Inter.

Despite the clear message that the interest rate hike cycle is over, the statement suggests that this cycle could be resumed “if appropriate”. “Leaving this door open is very important, especially in times of high uncertainty like the one we are currently experiencing”, emphasized Helena Veronese, Chief Economist at B.Side Investimentos.

Julio Cesar Barros, chief economist at Banco Daycoval, highlighted the statement by stating that “to ensure inflation convergence to the target in an environment of unanchored expectations, a significantly contractionary monetary policy is required for a very long period”. In other words, he assesses, “the interest rate cut cycle is off the table. This, in a way, is in line with our expectation of a resumption of interest rate cuts only in 2026”.

This is the highest level of the Selic rate since July 2006, when it went from 15.25% to 14.75%. The basic interest rate is the Central Bank's main instrument for controlling inflation. On the other hand, high interest rates slow down economic activity, increase the cost of credit and increase government spending on interest payments on the public debt.

Analysts consulted by IstoÉ Dinheiro point to the message of “commitment” to making inflation converge to the target . Fecomercio-SP, for example, assesses “that the committee increased interest rates to consolidate its robust approach to controlling inflation”.

Paulo Cunha, CEO of iHUB Investimentos, believes that the Central Bank’s increase is consistent with the current inflationary scenario. “The decision was technical and crucial. Now, whether or not the increases will continue will depend on the indicators, the government’s commitment to public finances and confidence in the direction of the Brazilian economy in the coming months,” he says.