Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-23
The Copom minutes released this week kept a 25bp November cut alive, arguing inflation is still demand-driven while flagging oil as an emerging risk. Focus economists lowered their end-2026 Selic forecast to 13.50%. Fiscal anxiety persists: government budget papers project public debt near 90% of GDP by 2029/2030, and the Senate's fiscal watchdog sees a R$86bn 2027 shortfall.
Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-23
Top developments
Copom minutes: demand still driving inflation, November cut in play
The minutes of the September 16 meeting, released Tuesday (September 22), say Brazilian inflation remains driven by demand after the cut to 13.75% and repeat that fiscal slippage could lift the neutral rate. Analysts read the document fuller discussion of credit conditions and weaker activity as keeping a 25bp cut in play for November, though a possible US–Iran deal and rising oil add an inflation-boosting wildcard to the data-dependent decision
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Focus lowers end-2026 Selic forecast to 13.50%
Focus survey respondents cut their end-2026 Selic projection to 13.50% from 13.75% after the fifth straight 25bp cut, with 2026 inflation expectations also revised down. The Copom minutes had left the next move open, so the market is now pricing gradual easing toward 12% by end-2027
Fiscal projections: debt heading toward 90% of GDP
Budget documents sent alongside the 2027 budget proposal show government's own projection of public debt at 89.6% of GDP in 2029 — rising to 89.7% by 2030, and above 90% if the fiscal framework's floor-based scenario is pursued. The Senate's IFI independently projects an R$86bn 2027 deficit (versus the government's R$18.6bn surplâteau) and 115% of GDP by 2036, warning that breaching tolerance limits would trigger harsher 2028 spending blocks
Real outperforming as election race stays tight
Movement toward a possible change of government is fueling demand for Brazilian FX and equities, with the real one of the standout EM currencies. The real firmed to 5.1029 per dollar and Ibovespa gained 0.44% to 187,423 points on Tuesday, though strategists caution fiscal risks remain elevated under either candidate
States heading toward R$37bn primary deficit
Brazilian states are tracking a combined R$37bn primary deficit in 2026, as election-year investment, credit operations and debt refinancing erode balances that had been strong for several years — an added layer to the federal fiscal picture
Local view
Brazilian financial media parsed the Copom minutes closely: UOL's coverage asks whether the minutes signal another cut, noting the latest Focus already projects a 0.25pp cut to 13.5%. O Globo detailed the official inflation trajectory alongside the Focus path of 13.75% at end-2026 and 12% at end-2027. Metrópoles highlighted the committee's "increased uncertainty" language and its cautious stance. On the fiscal side, Gazeta do Povo flagged a TCU report that a generous rule lets the government meet the fiscal target with up to R$60bn of primary deficit, and Folha columnist Bruno Funchal called the R$18.6bn 2027 surplus promise dependent on optimistic growth and revenue assumptions
Context & numbers
- Selic: 13.75% after the September 16 cut — the fifth straight reduction
- Copom reference path per Focus: 13.75% end-2026, 12% end-2027
- DI curve: DI Jan-2027 traded down to 13.475%-area levels earlier this week with optimism on more Selic cuts; front rates pared on Tuesday's oil-driven global pressure
- 10-year government bond yield: fell to ~14.14% in September, a three-month low, after softer inflation data (Sept 17)
- BRL: 5.1029/USD; Ibovespa: 187,423 (+0.44%) on Tuesday
- Public debt: 89.6% of GDP projected 2029 (government), 115% by 2036 (IFI)
On the radar
- Atlas poll released Wednesday (Sept 23) shows Lula numerically ahead of Flávio Bolsonaro — election-driven FX/rates volatility expected into the October first round (URL as published: https://www1.folha.uol.com.br/mercado/2026/09/dolar-abre-em-alta-com-cenario-eleitoral-e-petroleo-no-radar.shtml)
- Oil prices: possible US–Iran talks are the key global inflation wildcard for the Copom's next decision
- Flash activity surveys were on Wednesday's agenda per the morning call; watch for signals confirming the slowdown the Copom minutes flagged
- TCU pressure on debt-projection methodology (floor-vs-center of fiscal target) may keep fiscal credibility friction alive
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