Brazil's benchmark interest rate, the Selic, stands at 13.75% a year, and the central bank now says those high borrowing costs are visibly slowing the economy: in minutes released on Tuesday (22), the rate-setting committee Copom judged that activity is losing steam under monetary policy, while inflation is falling. For households, the message cuts both ways. Credit and installment plans remain expensive, but grocery bills are rising more slowly.
The document covers the meeting held last week, when the committee cut the rate from 14% to 13.75%, its fifth straight reduction. The clearest sign of the slowdown is second-quarter GDP (the sum of all goods and services produced in the country): growth of 0.5% from the previous three months, less than half the 1.1% posted at the start of the year, according to statistics agency IBGE. Weaker household consumption dragged the figure down.
"The most recent GDP reading, referring to the second quarter of 2026, confirmed the deceleration pointed to by other indicators and revealed that the movement was more intense in the economic activities and demand components most sensitive to the business cycle," the minutes say.
Expensive credit cools consumption
Credit tells the same story. In free-market loans, where banks and clients negotiate rates freely, the minutes record a slowdown in longer-term lines such as auto financing. The exception is directed credit, cheaper loans backed by government rules, which keeps expanding, above all in mortgages, after President Luiz Inácio Lula da Silva's administration launched measures to spur consumption in an election year.
Context: Copom is the committee of central bank directors that sets the Selic, the base interest rate of the Brazilian economy. When the Selic rises, borrowing gets costlier, loans, investment and consumption cool, and pressure on prices eases; that is how the central bank chases its inflation target. The minutes, released days after each meeting, show how directors reasoned through the decision.
Inflation falls, with temporary help
On prices, the minutes point to falling consumer inflation, both in the headline index and in core measures, which filter out volatile items to reveal the trend. The IPCA, Brazil's official consumer price index, has accumulated 4.22% over the 12 months through August: a basket that cost 100 reais a year ago now costs 104.22 reais. The figure is still above the 3% target, but within the tolerance band, which runs from 1.5% to 4.5%.
The drop, though, had a temporary push: electricity bills fell on a bonus from the Itaipu dam, which will not repeat. "Although monetary policy is contributing decisively to the disinflation process, inflation remains pressured by demand, requiring monetary policy to maintain its restrictive character," the minutes say. The document also warns that fiscal slippage and the expansion of directed credit can raise the interest rate needed to contain prices.
Projections remain above target at every horizon, the minutes note: financial markets estimate 4.92% for 2026, 4.3% for 2027 and 3.80% for 2028, according to news outlet G1. Faced with that, the central bank promised "perseverance, firmness and serenity" and avoided signaling its next move. Markets, however, are already betting on one more cut this year, with the Selic ending 2026 at 13.50% a year.