Lower crude prices and softer consumer inflation strengthened expectations that the BCB may cut the Selic rate at its August 5 meeting, while the latest Focus Survey trimmed 2026 inflation and year-end rate forecasts.
Brazil's 10-year government bond yield dropped to 14.56% from a nearly three-month high of 15% reached in late July, as easing tensions in the Middle East pushed oil prices lower and reduced inflation concerns. The move added to expectations that the BCB (Brazil's central bank) will cut the Selic rate from 14.25% at its August 5 meeting. Support for that view also came from softer domestic price data: consumer prices rose 0.06% in the month to mid-July, down sharply from 0.41% in June and below forecasts of 0.2%. The latest Focus Survey likewise lowered the 2026 inflation forecast to 5.03% from 5.12% and cut the year-end Selic projection to 13.75% from 14.00%. Hopes for a diplomatic resolution improved after Iran signaled progress in negotiations to restore shipping through the Strait of Hormuz, following US President Donald Trump's decision to call off a planned strike.