Central Bank keeps Selic at 13.75% and interrupts cycle of interest rate cuts

The Central Bank of Brazil kept the Selic policy rate unchanged at 13.75%, halting the sequence of rate cuts that had been under way. The decision signals that policymakers are prioritizing inflation control over near-term easing, which keeps Brazil's real policy rate among the highest in the world and widens its carry advantage against lower-yielding developed-market currencies. This dynamic tends to support the real through carry-driven capital inflows, while pressuring domestic equities sensitive to financing costs and weighing on rate-sensitive sectors such as housing and consumer credit. Fixed-income markets are most directly exposed, as the pause repricing pushes front-end DI futures higher and compresses expectations for the timing of the next cut. Traders will watch the upcoming IPCA inflation release and the Central Bank's forward guidance in its next Copom communiqué for signals on when easing could resume.

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