Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-08
Brazil's financial markets reopened on September 7 with a focus on the DI futures curve, where rates fell as investors priced in a potential extension of the Selic cutting cycle. Meanwhile, fiscal tensions escalated as the TCU ordered the government to project public debt based on the lower bound of the fiscal framework, and XP lowered its 2026 GDP growth forecast to 1.7%.
Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-08
Top developments
XP Cuts 2026 Growth Forecast to 1.7%, Sees Selic at 13.25%
On September 5, major brokerage XP released a revised outlook cutting Brazil’s 2026 GDP growth forecast to 1.7% from previous estimates. The firm now projects the Selic rate to end the year at 13.25%, implying further easing beyond current consensus levels of 13.75%. This revision reflects a more dovish stance driven by cooling inflation and economic slowdown, signaling that the central bank may have room for additional rate cuts despite fiscal concerns.
TCU Orders Government to Use Lower Bound for Debt Projections
On September 4, the Federal Court of Accounts (TCU) determined that the federal government must project public debt using the lower limit of the fiscal framework's primary target, rather than the center. The TCU argued that the lower bound is the reference point for budget corrections and contingencies. This ruling adds pressure on the fiscal framework, as using the stricter lower bound could imply a need for tighter spending controls or higher revenue assumptions to maintain debt sustainability.
DI Futures Fall on Election Outlook and Global Yields
On September 4, Brazilian DI (Deposit Interbank) futures declined across the curve, with the January 2029 contract falling to 13.885%. Market participants cited relief from US Treasury yields and a tightening race between President Lula and Flávio Bolsonaro as key drivers. The drop in longer-term rates reflects expectations that an electoral outcome favoring market-friendly policies or a continuation of moderate fiscal adjustments could lead to a steeper decline in the Selic over the medium term.
Planning Minister Reaffirms Commitment to Fiscal Center in 2027
On September 4, Planning Minister Bruno Moretti stated that the government intends to achieve the center of the 2027 primary target without relying on accounting discounts permitted by the fiscal rules. This statement comes amid skepticism from international investors about the credibility of Brazil's fiscal adjustment. The government's 2027 budget proposal, submitted in late August, projects an effective primary surplus of R$ 18.6 billion, but critics argue this relies heavily on optimistic revenue projections, including R$ 22.4 billion from pre-sal auctions.
Local view
Local media outlets like Folha de S.Paulo and Gazeta Mercantil are highlighting the divergence between the government's fiscal rhetoric and the TCU's technical requirements. Money Times reported that the "domestic scenario" is driving the DI curve lower, with traders betting that the Copom will accelerate cuts if inflation continues to cool toward the 3% target. However, O Globo notes that the "fiscal discredit" remains a significant risk premium for Brazilian assets, particularly as the election cycle intensifies.
Context & numbers
- Selic Rate: Currently at 14.00% following the August decision; consensus expects 13.75% by year-end, but XP sees 13.25%.
- DI Futures: Jan 2029 DI fell to 13.885% on Sept 4; Jan 2027 DI traded around 13.635% in late August.
- Public Debt: Reached 82.5% of GDP in July, the highest level in over five years.
- 2027 Budget: Projects R$ 18.6 billion primary surplus and R$ 3.459 trillion in total revenue.
On the radar
- Fed Policy Impact: Markets are pricing a Fed rate hike in September, which could pressure the BRL and limit BCB's ability to cut rates aggressively.
- Pre-Sal Auction: The government is counting on R$ 22.4 billion from extraordinary pre-sal auctions in 2027 to meet its surplus target, a figure analysts view as ambitious.
- Election Volatility: With the October runoff approaching, volatility in DI futures and the Real is expected to increase as polls shift between Lula and Flávio Bolsonaro.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
Powered by
