Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-21
The Central Bank of Brazil (BCB) cut the Selic rate to 13.75% on September 17, marking the fifth consecutive reduction, while simultaneously signaling that future easing is not guaranteed. Despite the cut, DI futures curves steepened due to rising fiscal concerns and electoral uncertainty, with the government projecting public debt approaching 90% of GDP by 2029.
Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-09-21
Top developments
BCB Delivers Fifth Consecutive Selic Cut to 13.75%
On September 17, the Copom unanimously decided to lower the Selic rate by 25 basis points to 13.75% per annum, extending its easing cycle amid cooling inflation and slowing economic growth. The decision came hours after the US Federal Reserve raised rates, narrowing the carry trade cushion for Brazilian assets. While the move was widely expected, the committee’s statement left the pace of future cuts open-ended, emphasizing the need to monitor fiscal developments and global volatility.
Public Debt Projected to Near 90% of GDP by 2029
In a significant fiscal warning, the government’s 2027 budget proposal, released in mid-September, estimates that public debt will reach approximately 89.6% of GDP by 2029. If the government fails to meet the primary surplus targets, debt could exceed 90%, raising concerns among investors about the sustainability of the fiscal framework. This projection contrasts with the Senate’s Fiscal Responsibility Office (IFI), which forecast an R$86 billion deficit for 2027, contradicting the government’s surplus target.
DI Curve Steepens as Markets Weigh Election Risks
DI futures contracts rose following the Selic decision as investors priced in higher risk premiums linked to the upcoming presidential election and fiscal uncertainty. The DI rate for January 2027 traded around 13.635%, while longer-dated contracts saw increased volatility as the market digested the government's expansionary social spending announcements just weeks before the first-round vote. The steepening curve reflects skepticism that the current easing cycle will continue uninterrupted if fiscal discipline deteriorates post-election.
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Local view
Local media highlighted the tension between monetary easing and fiscal deterioration. Valor Econômico reported that despite the Selic cut, long-term rates climbed as markets reacted to the STF (Supreme Court) tensions and election-related risks, noting a "relevant addition of risk premiums" in long-term bonds. Folha de S.Paulo focused heavily on the debt projections, warning that the path to 90% of GDP could trigger stricter spending restrictions under the fiscal framework if targets are missed. Meanwhile, Gazeta do Povo reported on a TCU finding that a "generous rule" allows the government to claim compliance with fiscal targets even while running a R$60 billion primary deficit, fueling criticism of the framework's credibility.
Context & numbers
- Selic Rate: 13.75% p.a. (cut from 14.00% on Sept 17).
- DI Futures (Jan 2027): Traded near 13.635% after the cut, reflecting mixed sentiment on future easing.
- Public Debt Projection: ~89.6% of GDP by 2029; currently at record 82.5% of GDP as of July,.
- 2027 Fiscal Target: Government projects R$18.6 billion surplus; IFI projects R$86 billion deficit.
- IPCA Inflation Expectation: Focus survey lowered 2026 inflation expectations to 4.9% from 5.0%.
On the radar
- Copom Minutes: The detailed minutes of the September meeting are scheduled for release on September 22, providing more insight into the committee's debate on the end of the easing cycle.
- Remaining Meetings: Two Copom meetings remain in 2026, scheduled for November 3-4 and December 8-9, coinciding with the post-election transition period.
- Electoral Court Rulings: Ongoing legal challenges regarding campaign finance and social spending announcements (Bolsa Família adjustments) continue to create headlines and potential volatility in the DI curve.
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.
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