Brazilian Economic Activity Contracts in September Amid Low Inflation and Stable Selic Rate
Brazil's economic activity slightly contracted in September amid the lowest inflation in decades and a steady Selic interest rate, reflecting cautious monetary policy amid growth challenges.
- • Brazil's economic activity fell 0.2% in September 2025 compared to August.
- • Year-over-year economic activity increased by 4.9%, with robust annual and year-to-date gains.
- • Inflation was remarkably low at 0.09% in October, the lowest since 1998, with 12-month inflation at 4.68%.
- • The Central Bank's Selic rate remains at 15%, held steady for the third time due to inflation and economic conditions.
Key details
Brazil's economic activity experienced a slight contraction of 0.2% in September 2025 compared to the previous month, according to data from the Central Bank's Economic Activity Index (IBC-Br). The third quarter saw a more noticeable decrease of 0.9%, reflecting a short-term slowdown. However, on a year-over-year basis, economic activity was up by 4.9% compared to September 2024, with the IBC-Br rising 14.2% year-to-date and 13.5% over the past twelve months, indicating resilient longer-term growth despite recent monthly declines.
The Central Bank’s Monetary Policy Committee (Copom) maintained the Selic rate at 15% annually for the third consecutive time to control inflation, which remains above the target but is showing signs of easing. Inflation, measured by the IPCA, was exceptionally low at 0.09% in October 2025—the smallest October reading since 1998—and the 12-month inflation rate dropped to 4.68%, slipping below 5% for the first time in eight months. This reduction is partly due to a decrease in electricity costs.
While the Selic rate remains the highest since July 2006, the Central Bank has indicated it may raise rates if necessary to maintain price stability. Analysts expect the Selic will hold at 15% through the end of 2025, declining gradually over the next few years.
Despite the monthly contraction, Brazil’s economy grew by 0.4% in the second quarter of 2025 and is projected to grow 3.4% in 2024, marking the largest expansion since 2021 and representing a fourth consecutive year of growth. The external economic environment, notably uncertainty tied to the U.S. economy, continues to pose challenges, influencing Brazil's monetary policy decisions.
In summary, Brazil's economic landscape as of September 2025 shows a modest short-term decline in activity amid a prolonged period of positive growth and a cautiously stable monetary policy environment aiming to balance inflation control with sustaining economic expansion.
This article was synthesized and translated from native language sources to provide English-speaking readers with local perspectives.