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J P M O R G A N Latin America Economic Research

29 July 2026

Reaction function

We expect the BCB to cut the Selic rate by 25bp for the fourth consecutive time, EM, Economic and Policy Research

to 14.00%, at the conclusion of next week’s COPOM meeting. This is aligned with Vinicius Moreira

market pricing and the Focus consensus survey. Our reasoning is that the BCB has (55-11) 4950-3195

continued cutting at this pace even when inflation and activity data – alongside vinicius.moreira@jpmorgan.com

rising inflation forecasts – were challenging the calibration cycle at the time of Mirella Sampaio

recent meetings. Most recently, the data have turned softer as illustrated by this (55-11) 4950-3289

week’s inflation release. Given the Committee’s revealed reaction function, we mirella.sampaio@jpmorgan.com

expect weak inflation and activity prints to reinforce the BCB’s view that the Gustavo Ribeiro

calibration cycle should continue. (55-11) 4950-4059

gustavo.ribeiro@jpmorgan.com

Banco J.P. Morgan S.A.

Governor Galípolo has reiterated, including at a recent event, the central bank’s

data dependence. At its June meeting, the BCB faced headline inflation above the

upper bound of the target range, with the May CPI rising to 4.7%oya and continued

pressure in core measures. Growth was also firmer than expected: 1Q GDP

surprised the BCB to the upside, and April industrial production, services output,

and the economic activity index (IBC-Br) rose, while retail sales weakened after

a very strong run earlier in the year. At the same time, the central bank lifted its

inflation forecasts – though its estimate for the relevant policy horizon (1Q28) rose

only slightly to 3.2% – and it assessed that risks to the inflation outlook were

asymmetric to the upside.