By Gabriel Burin
BUENOS AIRES, Jan 23 (Reuters) – Brazil’s central bank will likely start cutting interest rates for the first time in nearly two years in March to boost a weak economy, according to economists polled by Reuters.
Lower interest rates, combined with some stimulus measures, should support consumption and counter a poor performance by the country’s vast industrial sector.
Analysts polled said it is more likely that Latin America’s No.1 economy grows more than expected rather than less in the run-up to a national vote in October in which President Luiz Inacio Lula da Silva will seek reelection.
The central bank will probably keep the Selic benchmark rate on hold at 15% in its January 28 meeting for the fifth time in a row, according to 32 of 35 economists polled January 19-22.
Two participants forecast a quarter-point cut to 14.75% next week and one expected a 50 basis-point reduction to 14.50%.
Of 34 participants who responded to an extra question on the next move of the bank’s monetary policy committee, known as Copom, a strong majority of 28 expected the first cut to come in March, with 15 forecasting an initial 50 basis points. Fewer, 13, predicted a 25 basis points cut then to 14.75%.
It would be the first reduction since May 2024, when policymakers adopted a hawkish stance against rising consumer prices, with periods of hikes in the cost of borrowing as well as leaving rates unchanged at high levels.
“The decrease in inflation expectations, the softening of current inflation, and our expectation that inflation will continue improving would allow Copom to begin the cutting cycle in March,” Citi analysts wrote in a report.
Annual inflation ended last year at 4.26%, slowing further below the 4.5% threshold that marks the upper limit of the central bank’s target of 3% plus or minus 1.5 percentage points.
This improvement may lead policymakers to include subtle changes in the accompanying statement of next week’s decision, indicating a shift ahead.
“A possible new development could be the exclusion of the part regarding the possibility of resuming the cycle of interest rate hikes,” said Stephan Kautz, chief economist at EQI Asset.
“Some expressions from previous statements, such as ‘gradual’, ‘parsimony’, and ‘lagged effects’ of monetary policy, could be other options to indicate the proximity of the start of the interest rate cut cycle.”
As economic growth winds down in the first-half of the year, consumer prices are expected to decelerate further before regaining speed in the last months of 2026, a separate Reuters poll showed.
Gross Domestic Product (GDP) is set to expand 1.8% this year compared to an expected 2.3% rate for 2025, according to median forecasts of 47 economists. Official data for last year’s GDP are due for release in March.
Of 18 participants who answered an extra question on risks to their GDP forecasts, a majority of 12 said growth may surprise on the upside this year, while 6 viewed chances of a slower expansion.
“The boost will come from household spending… driven by consumption stimulus measures implemented in late 2025 and early 2026,” said Laiz Carvalho, Brazil and Chile economist at BNP Paribas.
Last month, the government decided to allow 14 million dismissed employees to withdraw a total 7.8 billion reais ($1.45 billion) from a public insurance fund for workers.
(Other stories from the Reuters global economic poll)
(Reporting and polling by Gabriel Burin in Buenos Aires; Editing by Ross Finley and Chizu Nomiyama )
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