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Brazilian real faces limited support after BCB easing signals caution
Banco Central do Brasil cut the Selic rate 25bp to 14.0%, keeping the easing cycle open while Societe Generale flags fiscal risks and de-anchored inflation expectations as limits on further cuts.
Societe Generale said the Brazilian real is likely to see limited support after the Banco Central do Brasil, or BCB, cut the Selic rate by 25 basis points to 14.0%, extending a roughly 100bp easing cycle that began in March. In commentary carried by FXStreet, the bank noted the central bank avoided explicit forward guidance and instead said the size of additional policy calibration will depend on incoming data.
Societe Generale’s FXStreet analyst Dev Ashish reiterated a base case for one more 25bp cut later this year, which would take the Selic rate to 13.75%. The view is supported by softer near-term inflation and moderating growth, but the firm stressed that constraints remain from potential inflation reacceleration in 4Q26.
The analysis also pointed to persistently de-anchored medium-term inflation expectations, ongoing fiscal risks, and an elevated structural or neutral interest rate in Brazil as factors likely to limit the scope for further easing in coming quarters. Societe Generale expects a pause after the additional cut as inflation firms again in 4Q26 and political uncertainty increases ahead of the October election.