BC Won’t Hesitate to Adjust Selic Rate if Needed, Says Nilton David in 2025

• What Did Nilton David Say About the Selic Rate?
• Why Is the BC Keeping the Selic Rate at 15%?
• How Does Inflation Factor Into the BC’s Decision?
• What Role Do Market Expectations Play?
• What’s the Outlook for Brazil’s Economy?
• How Did the Market React to the BC’s July Decision?
• What Are the Risks of Overreacting to Short-Term Noise?
• Final Thoughts: What Does This Mean for Investors?
• FAQs

In a recent statement that caught the attention of financial markets, Nilton José David, the Monetary Policy Director of Brazil’s Central Bank (BC), emphasized the institution’s readiness to either raise or adjust the Selic rate if economic conditions demand it. Speaking at an event hosted by the Spanish Chamber in São Paulo on October 9, 2025, David reiterated the BC’s commitment to maintaining the current benchmark interest rate at 15% for an extended period. However, he left the door open for potential adjustments, highlighting the heightened uncertainty in the current economic cycle compared to previous ones. This article delves into David’s remarks, the broader economic context, and what it means for investors and the Brazilian economy.

What Did Nilton David Say About the Selic Rate?

Nilton David’s comments were clear: the Central Bank is prepared to act if the economic landscape shifts. “If there’s any change in course, we won’t have any problem raising or adjusting the Selic,” he stated. This flexibility underscores the BC’s cautious approach in a volatile global environment. David pointed out that the current monetary policy cycle is distinct due to “significantly greater” uncertainty, necessitating a more restrictive stance than in past cycles.

Why Is the BC Keeping the Selic Rate at 15%?

The decision to pause Selic rate hikes in July 2025 was met with market approval, according to David. He explained that this pause requires a prolonged period of stability to bring inflation back to the target range. The BC’s inflation target is centered at 3%, with a tolerance margin of 1.5 percentage points in either direction. David noted that the trade-off for not exceeding the 15% rate is this extended stability period. “This ‘quite prolonged’ period is essentially the trade-off for not going beyond 15%,” he said.

How Does Inflation Factor Into the BC’s Decision?

Inflation remains a key concern. The National Broad Consumer Price Index (IPCA) ROSE 0.48% in September 2025, slightly below the 0.52% forecast by Reuters economists. Year-over-year inflation stood at 5.17%, also below the projected 5.22%. While inflation is “reasonably contained,” it remains above the BC’s tolerance band. David acknowledged that the economy has experienced four years of “robust and above-expected growth,” with activity still above potential. However, he anticipates a moderation in growth, which should help bring inflation down to target levels.

What Role Do Market Expectations Play?

David highlighted that the BC’s inflation projections don’t incorporate all the variables considered by market participants, such as fiscal policy changes or shifts in U.S. trade policy. The Focus report, which aggregates market expectations, includes these factors, creating a divergence between the BC’s and the market’s views. David stressed that the BC aims to avoid “reacting to noise” and introducing unnecessary volatility into the market.

What’s the Outlook for Brazil’s Economy?

The prospective scenario, as outlined by David, is one of cooling growth—sufficient to rein in inflation but not so drastic as to derail the economy. He described the current inflation as “reasonably contained” but emphasized the need for vigilance. The BC’s measured approach reflects its balancing act between fostering growth and ensuring price stability.

How Did the Market React to the BC’s July Decision?

David noted that the July 2025 decision to halt Selic rate hikes was “very well received” by the market, even though some analysts had anticipated further increases until inflation expectations declined more significantly. This decision underscores the BC’s confidence in its current policy trajectory and its ability to adapt if conditions change.

What Are the Risks of Overreacting to Short-Term Noise?

David cautioned against overreacting to short-term fluctuations, emphasizing the BC’s focus on long-term stability. “We don’t want to run the risk of reacting to noise,” he said, adding that the BC won’t “introduce volatility into the market.” This stance aligns with the institution’s reputation for prudence and data-driven decision-making.

Final Thoughts: What Does This Mean for Investors?

For investors, David’s remarks signal a Central Bank that’s both vigilant and flexible. The commitment to maintaining the Selic rate at 15% for an extended period provides some predictability, while the openness to adjustments ensures responsiveness to changing conditions. As always, staying informed and agile is key in navigating Brazil’s dynamic economic landscape.

FAQs

What did Nilton David say about the Selic rate?

Nilton David stated that the Central Bank is prepared to raise or adjust the Selic rate if economic conditions change, emphasizing flexibility amid heightened uncertainty.

Why is the BC keeping the Selic rate at 15%?

The BC is maintaining the rate at 15% to ensure prolonged stability, aiming to bring inflation back to its target range without introducing unnecessary volatility.

How does inflation influence the BC’s decisions?

Inflation remains above the BC’s tolerance band, prompting a cautious approach. Recent data shows inflation at 5.17% year-over-year, slightly below expectations but still elevated.

What’s the outlook for Brazil’s economy?

The BC anticipates a moderation in growth, which should help reduce inflation. The economy is expected to cool but remain stable.

How did the market react to the BC’s July 2025 decision?

The market responded positively to the pause in rate hikes, viewing it as a well-calibrated MOVE despite some analysts’ earlier calls for further increases.