Brazil’s central bank reduced its benchmark rate to 14.75% in March, less than the expected 50bps reduction, saying a monetary policy calibration cycle is needed as the prolonged hold provided evidence of transmission on the slowdown in economic activity. External factors such as the escalation of geopolitical conflicts in the Middle East and global financial volatility continue to affect emerging markets, while domestically growth is moderating even as the labour market remains resilient and inflation has improved but stays above target. Inflation expectations stand at 4.1% for 2026 and 3.8% for 2027, and Copom projects inflation at 3.3% by the third quarter of 2027. The committee flagged upside risks from persistent services inflation and a more depreciated exchange rate, and downside risks from a more pronounced global slowdown or reduction in commodity prices, judging that this decision remains consistent with converging inflation to target while smoothing the cycle.