Analysis: Brazil and the USA decide interest rates in the face of the war in the Middle East

The meetings that define interest rates in Brazil and the United States are already underway, marking the so-called "super Wednesday". In Brazil, the financial market expects a new cut in the Selic rate, while in the United States interest rates are widely expected to remain unchanged. Economics analyst Victor Irajá explained the scenario during CNN Backstage this Tuesday (16).

In the minutes of the last Central Bank meeting, held between April 29th and 30th, the institution pointed to the geopolitical scenario as one of the main inflationary risk factors. Furthermore, the BC had already registered a worsening in market expectations regarding projected inflation for the end of 2026.

The Focus Bulletin, which compiles financial market projections, raised its forecasts for the IPCA at the end of 2026 for the 14th consecutive week. "Now the forecast is that the projection will close the year at a level of 5.3%, well above the ceiling of the target pursued by the Central Bank", highlighted Irajá.

The central target is 3%, with a tolerance range of 1.5 percentage points up or down. This means that inflation of up to 4.5% would be within formal compliance with the target. The IPCA in May closed with a 12-month accumulated figure of 4.72%, already above the target ceiling.

Despite this risk scenario, the main analysis houses and banks continue to project a 0.25 percentage point cut in the basic interest rate, which would take the Selic from 14.5% to 14.25%. Among the institutions making this projection are Itaú, XP, BTG Pactual, Citi, Banco Inter and Suno Research.

"The Focus Bulletin itself now projects a terminal Selic in 2026 at 13.75%. Previously, this projection was 13.5%. This would be the scenario with a signal given by the Central Bank of greater caution and perhaps some type of signal about a subsequent interruption of this interest rate cut cycle", stated Irajá.

The analyst recalled that in the minutes of the last meeting, the Central Bank had already indicated that it would be well positioned, given the very restrictive level of the Selic.

United States
In the United States, this week's meeting is the first under the command of Kevin Warsh, appointed by Donald Trump to preside over the Federal Reserve. According to Irajá, there is a 99.6% chance of maintaining the interest rate range between 3.5% and 3.75%.

If at the beginning of the year a possible cycle of cuts by the North American central bank was still being considered, the current scenario points not only to maintenance, but also to the possibility of an increase in interest rates throughout the year.

This is because inflation in the United States has accelerated to 4.2%, while core inflation is at 2.9%, above the 2% target pursued by the Fed.

"All eyes are on what the new president of the Federal Reserve will indicate, who took over from Jerome Powell, who was criticized precisely for keeping interest rates at high levels", concluded Irajá.

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Source: CNN