Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-11
Markets are positioning for a near-certain Selic cut to 13.75% at the upcoming Copom meeting (Sept 15-16), with B3 options pricing the probability at 95%. This optimism coincides with cooling inflation expectations and a technical rebound in the Ibovespa, though fiscal concerns regarding the 2027 budget and TCU rulings on debt projections continue to pressure long-term yields.
Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-11
Top developments
Copom Meeting Looms with High Cut Probability
B3 options markets now price a 95% chance of a 0.25 percentage point cut in the Selic rate to 13.75% at the September 15-16 meeting. This decision will occur simultaneously with the US Federal Reserve’s own policy announcement, creating a dual-event volatility window for Brazilian assets. The high probability reflects recent data showing inflation cooling back inside the ceiling and a resilient labor market that allows the central bank more room to ease.
DI Curve Reacts to Oil and Election Polls
The local DI futures curve saw mixed movement this week, driven by external oil prices and domestic election polls. On September 10, rates rose as oil crossed US$101/barrel, pushing the January 2029 DI contract higher. However, by September 11, the curve retreated as new polls suggested a tighter presidential race, reducing immediate fiscal risk premiums for some investors. The January 2027 DI contract hovered around 13.635%, reflecting expectations for further cuts later in the cycle.
Ibovespa Rallies on Rate Cut Optimism
Brazil’s stock market posted its best close in four months on Friday, September 11, with the Ibovespa rising 1.42% to 188,269 points. Bank shares led the rally, benefiting from the anticipation of lower funding costs and stable credit quality. The real held steady at 5.1059 per dollar, indicating that currency markets are less sensitive to the rate cut than equity markets are to the easing cycle.
Local view
Money Times highlights that the "strong drop" in future interest rates this week was directly linked to the electoral scenario, where a technical tie in polls has alleviated some risk premiums previously priced into long-term bonds.
Valor Econômico notes that while rates have risen recently due to global bond pressure and oil prices, the domestic outlook remains dominated by the "accelerated" nature of the presidential campaign, which keeps investors cautious about the fiscal trajectory regardless of short-term Selic moves.
Context & numbers
- Selic Rate: Currently at 14.00%; market consensus is for a cut to 13.75% at the next Copom meeting.
- DI Futures: Jan 2027 DI at ~13.635%; Jan 2029 DI at ~14.065%.
- Public Debt: Reached 82.5% of GDP in July, the highest level in over five years.
- 2027 Budget Proposal: Sent to Congress with a projected primary surplus of R$ 18.6 billion and a minimum wage increase to R$ 1,741.
- Inflation Expectations: Focus survey cuts 2026 inflation forecast to 5.01%.
On the radar
- Copom Meeting: September 15-16, 2026. The committee will decide on the Selic rate; a cut to 13.75% is widely expected.
- TCU Ruling Impact: The Federal Court of Accounts (TCU) has ordered the government to project public debt using the lower bound of the fiscal framework, not just the center target, which could reveal a worse debt trajectory than previously advertised.
- US Fed Decision: Occurring same days as Copom; any hawkish surprise from the Fed could dampen the impact of Brazil's rate cut on the real.
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