Brazilian equities tumbled Thursday after the central bank cut its benchmark Selic rate, sparking a wave of selling across the Bovespa. The move, led by Governor Gabriel Galípolo, lowered the policy rate to 14.25%, matching the forecast of 31 of 34 economists surveyed by Bloomberg. Investors, however, balked at the accompanying warning that both growth and price pressures were accelerating.

Board members warned that the rate cut could stoke consumer prices already running above the central bank’s target, reviving concerns over a deteriorating inflation outlook. Earlier this year, Brazil’s CPI had slipped but recent data showed a rebound, prompting the monetary authority to balance stimulus against price stability. The mixed signal rattled foreign investors, who trimmed exposure to the real and related bonds.

The sell‑off erased roughly R$30 billion in market capitalisation, dragging the index down more than 2 percent and widening yield spreads on sovereign debt. Traders now price in a higher probability of another policy adjustment if inflation fails to converge to the 3 percent target. The episode underscores how tightly Brazilian markets tie monetary moves to inflation expectations.