Rather, it was the Brazilian central bank that stole the headlines last week by keeping its policy rate on hold at 15% for the third straight meeting. This decision takes place amidst a backdrop of worrying declining inflation projections. Together, these forecasts paint a rosy picture moving forward for the country’s economy. The Bank of England (BoE) has been under constant fire, with markets betting on a near-term cut. At the same time, the Polish central bank has taken steps to prepare for further easing as inflationary conditions have improved.
Brazil’s central bank opted to keep its interest rates unchanged at 15%, reflecting a cautious approach to monetary policy as inflation expectations improve. The Federal Reserve’s latest Summary of Projections indicates that Fed policymakers expect inflation to continue falling. Their projections are for a decrease from 4.8% this year down to 3.3% at the end of the policy horizon in Q2 2027. This decision is important beyond its immediate effects because it best embodies the bank’s belief in a stabilizing economic environment.
Inflation Trends in Brazil
Recent data has started indicating improvements for both headline inflation and underlying measures of inflation such as trimmed-mean inflation. Inflation expectations have increased to 4.5% for 2025 and to 4.2% for 2026. Both numbers are well above the central bank’s 3% target. The Brazilian real has displayed remarkable fortitude, rising close to 13.5% against the dollar this year. This increase is evidence of an optimistic view of the markets towards Brazil’s economic outlook.
The Brazilian central bank’s decision to hold rates signals more resolve to keep this positive trend going. Inflation is expected to settle down slowly. Policymakers are looking to avoid any unintended consequences and will be watching key economic indicators carefully before making any further loosening. The country’s monetary agency continues to keep an eye as it treads the tightrope between fighting inflation and fueling an economic recovery.
The Bank of England’s Dilemma
Meanwhile, across the Atlantic, the BoE’s MPC is walking a tightrope. UK money markets now price in a quarter of a possibility of a 25 basis point corporate tax cut occurring. This can be a reality in the very near future. Many analysts expect the decision to be a close call. It all comes down to the surprisingly named Andrew Bailey’s perception and his ability to create consensus among committee members.
The MPC’s next few decisions will have a huge impact on economic stability and market sentiment in the UK. Whatever course of action the BoE decides to pursue, it will need to do so with tremendous deliberation. Only modest movement is anticipated in the year ahead, including a full 25 basis point discount by February 2026. The committee’s challenge is to get this right by looking beyond today’s inflationary clouds and focusing on longer-term effects of its policy choices.
Poland’s Adjustments Amidst Declining Inflation
As many of you know, recently the National Bank of Poland (NBP) cut their interest rates. This amendment followed a sharp decline in inflation along with a more optimistic economic perspective for the nation. The October year-over-year CPI inflation is down to 2.8%. This drop is largely the result of a moderation in food price inflation year over year, as growth rate for services prices stay persistently elevated.
The NBP’s estimates serve to demonstrate that this core inflation – inflation net of food and energy prices – has gone down, signaling a more robust foundation of the economy. The provincial central bank’s target is between 1.9% and 4% inflation per year in 2026. For 2027, it anticipates a narrowly different low-to-high spread—1.1% to 4.1%. Little wonder, then, that these forecasts replace trepidation with optimism. Trouble looms as long as service prices continue to soar.
The zloty didn’t lose all that much ground after the NBP’s decision ultimately closing at EUR/PLN 4.256. This slight appreciation is welcome news, as it is due to greater market confidence in Poland’s monetary policy trajectory and Poland’s economic stability.