Selic: B3 Copom options indicate a 0.25% interest rate cut in August

The majority of investors in Copom (Monetary Policy Committee) Option Contracts traded on B3, the Brazilian Stock Exchange, believe that the next Central Bank meeting will result in a 0.25 percentage point cut in the Selic.

According to the probability chart from last Wednesday (8), the chance of a reduction of 0.25 percentage points is 72%. The second most likely hypothesis is the maintenance of the basic interest rate at the current level of 14.25%, with a probability of 26.9%, according to the negotiated contracts.

The possibility of a 0.50 percentage point cut appears with only a 1.5% chance.

The exchange's Copom option allows investors to negotiate contracts on variations in the Selic rate, decided at each meeting of BC directors.

Standardized and negotiated in the listed environment, the contract is, according to B3, "transparent regarding the expectations of scenarios per meeting, allows independent negotiation for each committee decision and expands the range of strategies to protect the investment portfolio."

At the start of negotiations, on June 10, most investors were betting on the Selic rate being maintained. However, after the Central Bank meeting held on June 17, when the rate was reduced by 0.25 percentage points, expectations changed.

Since then, the market has mostly priced in a new reduction of the same magnitude.

Market expects BC to maintain Selic rate cut | MARKET OPENING

Despite this, the last few days of trading indicate an increase in the volume of contracts that bet on maintaining the rate. On July 8, 139.6 million contracts were traded in this scenario, compared to just 4,600 that projected a cut of 0.25 percentage points.

The number was also well below the 235.4 thousand contracts traded on June 23, the date that recorded the highest volume of operations betting on a 0.25% reduction in the Selic.

If the prevailing expectation is confirmed, this will be the fourth consecutive drop in the basic interest rate promoted by the Copom. The movement follows a period in which the Selic remained at 15% throughout the second half of 2025, the highest level recorded in the last 20 years.

The next meeting of the Central Bank committee is scheduled for August 4th and 5th this year.

Brazil has the 2nd highest real interest rate in the world after the Selic rate rise

Source: CNN