With the rise in global interest rates, the market prices out a Brazil rate cut in September

Due to the sharp increase in global interest rates, Brazilian markets have largely eliminated the possibility of a new cut in the Selic, the benchmark interest rate, in September. Following positive inflation data from Brazil and the United States in recent weeks, financial institutions were expecting an interest rate cut in the September decision. However, the rapidly changing international conditions reversed these expectations.

The main reason for the markets' repricing is the escalation of tensions between the US and Iran and the return of Brent oil's barrel price to the 100 dollar level. While this situation has caused global interest rates to rise, the probability of the US Central Bank (Fed) raising interest rates in September has also risen above 80 percent. In parallel, the US 10-year Treasury bond yield reached its highest level since January of this year.

On the Brazilian side, the futures interest rate market still maintains a high probability of a 25 basis point cut at the Monetary Policy Committee meeting to be held in August. While the probability of an interest rate cut for the said meeting is measured at around 68 percent, the probability of the interest rate being kept unchanged is priced at 32 percent. The current Brazilian benchmark interest rate stands at an annual 14.25 percent.