Brazil's Copom unanimously cut the Selic 25bp to 14.50% but offered no forward guidance, warning that future moves depend on the depth and duration of the Middle East conflict and that inflation projections are moving further from target.Summary:Copom cut the Selic rate by 25 basis points to 14.50% on Wednesday in a unanimous decision, matching the expectations of 31 of 35 economists in a Reuters pollThe committee offered no forward guidance for a second consecutive meeting, saying future rate adjustments will incorporate new information on the depth and duration of the Middle East conflictPolicymakers flagged deanchored inflation expectations, rising headline and core inflation, and projections moving further from the 3% target, reinforcing a stance of serenity and cautionThe easing cycle began in March with an initial 25bp cut from a nearly 20-year high of 15.00%, with the central bank citing an extremely restrictive policy stance as justification for the start of cutsThe Focus survey's 2026 IPCA projection has risen for six consecutive weeks to 4.80%, above the 4.50% target ceiling, driven by Iran war energy price pass-throughThe BRL has strengthened since March, supported by Brazil's wide interest rate differential with advanced economies, helping contain imported inflation pressuresCopom also flagged ongoing monitoring of domestic fiscal policy developments and their impact on financial assets and monetary conditionsBrazil's central bank cut its benchmark Selic rate by 25 basis points to 14.50% on Wednesday, delivering a second consecutive reduction since launching its easing cycle in March, but the accompanying statement made clear that policymakers see the path ahead as narrow, conditional and increasingly complicated by external forces.The vote was unanimous across the rate-setting committee, known as Copom, and the outcome was in line with the expectations of the large majority of market economists. But the language surrounding the decision was notably cautious. Policymakers reiterated the need for serenity and caution and declined for a second straight meeting to offer forward guidance on future moves, instead conditioning the pace of further cuts on incoming information about the depth and duration of the conflict in the Middle East. The Iran war and its effects on global energy prices, supply chains and the broader growth outlook have introduced a layer of uncertainty that the committee was unwilling to look through.The domestic inflation picture is not cooperating. Copom stated explicitly that headline inflation and measures of underlying inflation have risen and are moving further from the 3% target, and that uncertainty around projections has considerably increased. Inflation expectations remain deanchored, the labour market is adding to price pressures, and the Focus survey of market economists has revised the 2026 IPCA projection upward for six consecutive weeks, reaching 4.80%, above the 4.50% upper bound of the target tolerance band. Before the Hormuz crisis began reshaping global energy markets, analysts had projected Brazilian inflation comfortably below 4% for the year.The context for the cut is important. The Selic had been held at 15.00%, a near 20-year high, since July 2025 as Copom pursued an aggressive tightening cycle to drag inflation back to target. The justification for beginning to ease was the exceptionally restrictive level of rates rather than any meaningful improvement in the inflation outlook, and that framing remains intact. Brazil carries one of the highest real interest rates in the world, and the wide differential with advanced economies has helped support the BRL since the March meeting, with a stronger currency reducing the cost of imports and providing some offset to energy-driven price pressures.The committee also flagged continued monitoring of domestic fiscal policy and its interaction with monetary conditions and financial assets, a reference to the ongoing tension between fiscal expansion and the central bank's price stability mandate. Any deterioration on that front, combined with further Middle East escalation, would quickly erode the already thin justification for continued easing and could see the cycle pause entirely in the months ahead. Copom (Comitê de Política Monetária) is Brazil's monetary policy committee, the equivalent of the Federal Reserve's FOMC or the Bank of England's MPC. It meets every 45 days to set interest rates and is part of the Banco Central do Brasil.Selic (Sistema Especial de Liquidação e Custódia) is Brazil's benchmark overnight interest rate, the equivalent of the Fed Funds rate or the Bank of England's base rate. It is the primary tool Copom uses to control inflation and is the rate at which banks lend to each other on an overnight basis using government bonds as collateral. This article was written by Eamonn Sheridan at investinglive.com.