Brazil's central bank is expected to cut its benchmark rate, the Selic, from 14% to 13.75% a year on Wednesday (Sept. 16), the fifth cut of the current easing cycle, according to O Globo. For consumers, the relief arrives slowly but in the right direction: cheaper installments on car and home loans, and lower yields on investments pegged to the rate. A central bank survey cited by Agencia Brasil shows the same market projection.
On the same day, the Federal Reserve, the US central bank, is expected to move the other way and raise its policy rate by a quarter point, from a range of 3.5% to 3.75%. US rates would end up at less than a third of Brazil's. The rare doubleheader earned the date the nickname "Super Wednesday", combining the decision of Brazil's Copom rate-setting committee with that of its US equivalent, the FOMC.
The reason for the Brazilian cut sits in household bills. The IPCA, the country's official inflation index, fell 0.32% in August, its best reading for the month since 2022, driven by cheaper residential electricity. On a R$ 500 grocery run, that drop means paying about R$ 1.60 less than in July.
The figure beat the forecast of economists polled by Reuters, who expected a 0.29% decline, and reinforced bets on a cut, CNN Brasil reported. Inflation is up 3.11% so far this year and 4.22% over 12 months. "The result opens room for a 0.25 percentage point cut," Julio Barros, an economist at Banco Daycoval, told CNN.
Context: the Selic is Brazil's benchmark interest rate, set by the Copom, the committee of central bank directors. It works as the price of money: higher, it makes credit expensive and cools inflation; lower, it cheapens loan installments and boosts the economy. A 0.25 point cut equals 25 basis points, the smallest step the committee usually takes.
Markets are already pricing in further cuts: a futures contract betting on Brazil's rate in January 2028 trades at 13.555%, below the current Selic, with another cut seen as possible in November, according to CNN Brasil. Marcela Kawauti, chief economist at Lifetime Investimentos, says the central bank "should keep a conservative stance with a slow pace of cuts", because inflation expectations remain far from target and fiscal pressures push on prices.
The Fed looks the other way
America's problem is the mirror image of Brazil's: inflation running too hot. The CPI, the US equivalent of the IPCA, rose 0.4% in August, and the core index, which strips out food and energy, advanced 0.3%; producer prices are up 5.4% over 12 months, more than double the Fed's 2% target.
After those figures, released on Friday (11), bets on a hike jumped from 70% to 90%, nine out of ten traders, according to Vinicius Flores, a partner at Stratton Capital. "American inflation has not yet entered a sufficiently comfortable path for the Fed," said Sidney Lima of Ouro Preto Investimentos. The PCE, the Fed's preferred index, comes out only after the meeting, leaving the CPI and producer prices as the references for the decision.
Flores still sees a chance the Fed holds steady, citing methodological revisions to the PCE and the political cost of raising rates before the midterm elections. The week also brings the central bank's weekly Focus survey of market expectations and Chinese economic data, according to UOL. Both decisions land on Wednesday (Sept. 16).