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Even If Selic Falls to 12.5% by the End of 2026, Brazilian Real Interest Will Remain Above 8% per Year, One of the Highest in the World.
The financial market is already pricing in that Selic may end 2026 at 12.5%, but this does not mean complete relief for the economy. Even in this scenario, Brazilian real interest will remain above 8% per year, one of the highest in the world, which limits the space for further cuts and reinforces the attractiveness of fixed income as an investment option.
According to a survey by the Bora Investir portal, the projected real interest for the coming years keeps Brazil in a negative spotlight, behind only countries with a history of instability, but far ahead of developed economies. While the United States pays real interest of around 2% and Japan almost zero, Brazil is expected to continue with rates four times higher.
Why Selic Can’t Fall Faster
Currently, Selic is around 14.9% per year, while expected inflation for 2025 is 4.8%. This mismatch generates a real interest close to 10%—a level considered excessive for an emerging country. The expectation is that the rate will gradually decrease, but factors such as fiscal risk, rising public debt, and electoral uncertainties limit the speed of this movement.
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A Brazilian city gains a factory worth R$ 300 million with the capacity to process 200 thousand tons of wheat per year, a mill of 660 tons/day, silos for 42 thousand tons, and an industrial area of 276 thousand m².
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Havan will leave the shopping mall in Blumenau to inaugurate something that the chain has never done before: a megastore in half-timbered style in the Historic Center of the city, which is expected to be completed in May and change the landscape of local retail.
Another point is the exchange rate. The smaller the differential between Brazilian and U.S. interest rates, the greater the pressure on the dollar. If Selic falls too much without fiscal balance, investors may withdraw funds from the country, depreciating the real.
What This Means for Investments
In practice, the outlook for high interest rates for longer keeps fixed income among the most attractive investments. IPCA+ Treasury bonds offer a real rate close to 7% per year, while exempt debentures can reach IPCA+9%. These returns are higher than many international assets and provide protection against inflation.
On the other hand, the Stock Market may lose steam if interest rates do not drop as expected since the cost of capital remains high. More conservative investors tend to prioritize CDI, Selic Treasury, and CDBs, which continue to pay relevant premiums.
Impact on the Brazilian Economy
Maintaining real interest above 8% per year means Brazil will continue to face difficulties in achieving sustained growth. Credit remains expensive, companies delay investments, and families encounter barriers to finance consumption. Nonetheless, monetary policy aims to balance inflation and exchange rate stability, even at the cost of some economic dynamism.
The market already bets that Selic will fall to 12.5% by 2026, but this does not change the fact that Brazil will continue with one of the highest real interest rates in the world. This reality reinforces the attractiveness of fixed income but limits economic growth.
And you, do you think the Central Bank should accelerate the drop in Selic or maintain a slow pace to avoid risks in the exchange rate and inflation? Leave your opinion in the comments; we want to know how you see the future of interest rates in Brazil.
Would you like me to also create a comparative table between Selic, inflation, and returns of different investments to make it even more visual and educational for the reader?
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