The second half opens with falling rates: what the Selic cut signals for credit and investment

Brazil’s Central Bank met on August 4 and 5 for the first interest rate decision of the second half, with the benchmark Selic rate starting from 14.25% a year. Markets went into the meeting pricing in another 0.25 percentage point cut, the fourth of the cycle that began in 2026, bringing the rate to 14%.

The backdrop supporting that bet is more comfortable than it was a few months ago. The US Federal Reserve holding rates steady eased some of the pressure on emerging markets, and Brazil’s weekly Focus survey brought, for the third consecutive week, a downward revision to the 2026 inflation forecast, now at 5.16%. Even so, the Central Bank itself has signaled caution: services inflation remains sticky, the labor market is hot, and the fiscal outlook remains the main risk factor for the path of interest rates over the medium term.

Regardless of the exact number announced this week, the direction of the cycle is already set. After more than a year with the Selic rate in high double digits, the cost of credit is starting to ease gradually, not abruptly. That changes the calculation for anyone making investment or financing decisions this half.

For companies, the gradual Selic cut favors planning around working capital and expansion financing, but it has not yet restored fixed income’s appeal to what it was in 2025. Floating rate instruments remain competitive, which keeps pressure on companies that depend on outside capital to grow. For investors, the move reinforces a pattern seen since the start of the cutting cycle: fixed rate and inflation linked bonds tend to gain value as further cuts are confirmed, while rate sensitive stocks, such as consumer and retail names, get an extra lift.

The Central Bank’s rate setting committee has four more meetings scheduled for the rest of the year, and markets are already pricing in the view that room for further cuts is limited, likely one or two more 0.25 point moves by December. That means the second half should not bring an abrupt shift in the cost of money, but a slow confirmation of a trend that was already on the radar since the first quarter. For those managing cash and portfolios, the moment calls for less betting on sharp moves and more attention to the pace of each meeting.