Selic at 13.75% leaves Brazil trapped between weak growth and inflation risk

Copom stopped five consecutive cuts as inflation expectations worsened and domestic activity slowed more sharply. Foreign capital faces damage from both sides of the policy mix.

Source-based facts

The Central Bank unanimously held the Selic at 13.75%. B3 reports that Copom cited greater uncertainty, higher inflation expectations and a sharper domestic slowdown. Inflation remains above the tolerance ceiling, expectations for 2026 and 2027 have moved further from the 3% target, and the committee gave no guidance for the next meeting. The communiqué also identified fiscal conditions and a persistently weaker exchange rate among inflation risks.

Observer analysis

Brazil is confronting an adverse combination rather than a single interest-rate problem: restrictive financing is weakening activity while inflation expectations remain insufficiently anchored. That prevents a simple policy exit and increases the probability of abrupt repricing whenever fiscal, currency or inflation data disappoint.

Risk transmission channels

1. Duration risk: long-term yields can remain elevated or rise, generating mark-to-market losses even with an unchanged Selic. 2. Corporate risk: expensive credit can deepen the slowdown and weaken debt service. 3. Currency risk: fiscal doubt or inflation de-anchoring can weaken the real and erase local returns in dollar terms. 4. Equity risk: high discount rates and weaker earnings can hit valuations simultaneously. 5. Policy-error risk: easing too early could intensify inflation and currency pressure, while prolonged restriction can deepen the contraction.

Original source

B3 · Bora Investir
Mercados hoje: investidores repercutem decisão do Copom e produção industrial ↗
5 November 2026

B3 · João Paulo dos Santos
Copom interrompe cortes e mantém taxa Selic em 13,75% ao ano ↗
4 November 2026