Copom Minutes Diverge Market Bets: Will Brazil Cut Rates in January 2025 or Hold?

• What Did the Copom Minutes Reveal?
• Why Are Banks Split on a January Rate Cut?
• How Does Inflation Factor Into the Decision?
• What’s the Labor Market Wildcard?
• Could External Shocks Delay Cuts?
• Historical Precedent: How Long Until Cuts Begin?
• What’s the Endgame for the Selic?
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The latest Copom minutes reveal a split in market expectations—some analysts see a January rate cut as unlikely, while others believe the door remains open. With inflation cooling but labor markets tight, Brazil’s central bank faces a delicate balancing act. Here’s a DEEP dive into the key takeaways, divergent bank forecasts, and what it means for the Selic’s trajectory.

What Did the Copom Minutes Reveal?

The minutes from Brazil’s Monetary Policy Committee (Copom) meeting, released on December 16, 2025, sent mixed signals. While acknowledging improved inflation data and slowing economic activity, policymakers emphasized persistent inflationary risks, including a tight labor market and unanchored expectations. The BTCC team notes the removal of phrases like "significantly contractionary" suggests flexibility, but the central bank remains cautious. "They’re buying time to assess cyclical components," says one analyst.

Why Are Banks Split on a January Rate Cut?

Major financial institutions disagree sharply:

• XP Investimentos predicts no cut until March 2025, projecting six consecutive 0.50% reductions.
• Itaú leans toward a 0.25% cut in January but admits the minutes reduced its likelihood.
• BTG Pactual calls January the "base case," citing subtle dovish tweaks in communication.

As one trader quipped, "The only consensus is there’s no consensus—classic Copom theater."

How Does Inflation Factor Into the Decision?

Recent CPI prints surprised positively, but Core metrics remain sticky. The minutes highlight concerns about services inflation and wage pressures, with expectations still above target across all horizons. "You can’t pop champagne when 12-month expectations are at 4.5%," warns an economist at TradingView.

What’s the Labor Market Wildcard?

Unemployment at 7.8% (Source: IBGE) keeps policymakers awake. The minutes describe conditions as "exceptionally tight," with resilient formal job creation. This complicates the disinflation process—historically, Brazil needs slack to curb price pressures sustainably.

Could External Shocks Delay Cuts?

Absolutely. The Copom repeatedly flagged global uncertainty, from volatile oil prices to China’s slowdown. A 10% BRL depreciation could force their hand, notes BTCC’s commodities desk.

Historical Precedent: How Long Until Cuts Begin?

Since 2000, Brazil’s average hold period after peak rates is 11 months. We’re now at month 8—suggesting patience isn’t unprecedented. But as the old market saying goes, "Selic cycles die hard."

What’s the Endgame for the Selic?

Banks project terminal rates between 12-12.75% by 2026. The path depends on whether inflation converges smoothly or requires policy rollercoasters. One thing’s certain: traders should brace for whipsaw volatility.

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Will the Copom cut rates in January 2025?

Diverging views exist. While BTG Pactual expects a 0.25% cut, XP and Itaú see higher odds of a hold. The minutes’ nuanced language allows both interpretations.

How many rate cuts are expected in 2025?

Forecasts range from 150-300 basis points total, with XP’s six 0.50% cuts being the most aggressive. Much hinges on Q1 inflation data.

What’s the biggest risk to rate cuts?

Stubborn services inflation and FX volatility pose key threats. As seen in 2023, Brazil’s central bank won’t hesitate to pause if conditions deteriorate.