Latin America Economic Research

Research evidence excerpt

Vinicius Moreira (55-11) 4950-3195

Banco J.P. Morgan S.A.

Mirella Sampaio (55-11) 4950-3289

Banco J.P. Morgan S.A.

Gustavo Ribeiro (55-11) 4950-4059

Banco J.P. Morgan S.A.

Brazil

The BCB cut the policy rate by 25bp to 14.00%, with a

statement that left the next decision to the data

We expect softness in upcoming inflation and activity

readings to lead the BCB to cut by 25bp in September

Plunging IP should be followed by negative June services and retail sales readings; July CPI should be soft

Lula and Flávio Bolsonaro confirmed their candidacies; polls show Lula ahead, with Flávio improving

This week’s COPOM meeting and post-decision communiqué

were very much in line with expectations. The BCB cut the

Selic rate by 25bp to 14.00%, with a message that was agnostic about the next steps. We interpret this as reinforcing Governor Galípolo’s recent message that the data will dictate how

prolonged the BCB’s calibration of the policy rate can be.

As discussed below, we expect soft activity and inflation

releases ahead of the next meeting to lead the BCB to complete its calibration with a final 25bp cut in September. In

fact, this once out-of-consensus view has been increasingly

priced in by the market as the economic data has been

released (Figure 1). We recognize, however, that a few risks

to the outlook — notably a tightening of financial conditions

that would lead to BRL depreciation and a continued rise in

inflation expectations — could lead the central bank to decide

that this week’s cut was the last.

Figure 1: Market-implied odds for the September meeting

On hold

-25bp

-50bp

100

90

80

70

60

50% prob. line

50

40

30

20

10

0

Jun 1, 26

Jun 21, 26

Jul 11, 26

Jul 31, 26

Aug 20, 26

Latin America Economic Research

JPMORGAN

07 August 2026

1.8% m/m sa after three months of negative readings. This

dynamic is pushing both goods sales and production down

from the levels observed at the end of 1Q, while services output is falling less than it did in 1Q (Figure 2). Overall, we see

some downside risks to our 2Q GDP growth estimate of 2%

q/q saar.

Figure 2: Activity indicators

%3m/3m saar. Considering retail and serv. forecasts for June

12

10

8

6

4

2

0

-2

-4

-6

-8

-10

Apr-25

…