Itaú Unibanco CEO Milton Maluhy cautioned against cutting Brazil’s benchmark Selic rate by force while leaving the outlook for future rates unchanged, saying the move could raise long-term borrowing costs for businesses and households. He made the comments on Wednesday while discussing the bank’s third-quarter results.
The debate followed renewed attention among members of President Luiz Inácio Lula da Silva’s government to economist André Lara Resende’s proposals for a different relationship between fiscal and monetary policy. Maluhy said there was no concrete discussion yet, describing the ideas circulating as speculation and saying the bank would assess specific proposals calmly.
Maluhy said structurally lower interest rates would benefit everyone, but would require conditions that support them. If short-term rates were pushed down without those conditions, he warned, long-term rates could rise sharply. He added that markets were waiting for the formation of Lula’s next economic team, including the appointment of a finance minister and clarity on how that minister would work.
The Itaú chief said regaining investment-grade status would be a worthwhile goal because it affects the country’s access to financing, including its volume and cost. Fiscal and social priorities, he said, need to move forward together.
Maluhy also pointed to risks that could add to inflation, including currency depreciation, higher oil prices and the tax reform. He said some economists were projecting inflation of as much as 6% in 2027. If inflation worsens, he said, the central bank’s response would be higher rates; more than 70% of market participants surveyed already expected the rate-cutting cycle to pause at the monetary policy committee’s meeting that day. He said rates could remain restrictive and broadly stable through next year, depending on economic conditions.
Lower rates would give banks room to expand lending more quickly, Maluhy said, because defaults tend to fall. However, he described the outlook for 2027 as more challenging, with economists revising growth forecasts and the possibility of weaker activity and higher unemployment. Itaú plans to keep prioritizing borrowers with stronger repayment capacity and loans backed by collateral, while focusing its portfolio growth on middle- and upper-income customers.
The bank is also seeking to control costs through prioritization, technology and transformation as it navigates a tougher environment for business and credit growth. Maluhy said this would not mean abandoning investment, but making choices without compromising the bank’s longer-term prospects.
Itaú reported recurring net income of R$12.617 billion for the third quarter, up 6.2% from the same period in 2025 and 1.7% from the second quarter of 2026. Its annualized recurring return on average equity was 23.6%, down from 24.3% in the previous quarter but up 0.6 percentage points year over year.
Sources: Folha Mercado.