Amid rising geopolitical risks, central banks in emerging markets in mid-August 2026 are demonstrating a mixed approach to monetary policy: some are concluding easing cycles, while others are signaling a pause. These decisions reflect a complex balance between domestic inflation targets and external shocks, primarily the conflict in the Middle East.
Brazil: easing with caution. The Central Bank of Brazil on August 5 lowered its key Selic rate by 25 basis points to 14%. This is the fourth consecutive cut, yet the board is clearly continuing to tighten the reins. The statement was much more restrained than in previous months: the regulator reassessed inflation risks as skewed to the upside and emphasized that it will "closely monitor" deviations of inflation expectations from target levels. Economists view this rhetoric as a signal of a possible end to the easing cycle, despite favorable consumer price data in July.
Mexico: waiting amid improvement. Banco de México, at its meeting on August 6, left the rate at 6,50%, as expected by the markets. However, the bank revised its inflation forecast, now expecting to reach the 3% target level only in the fourth quarter of 2027 — half a year later than previously assumed. Despite the resumption of the disinflation process, the board pointed to persistent upside risks for prices due to uncertainty in global energy markets and ambiguity regarding the future policy of the Federal Reserve.
Indonesia: a pause after a hike. Bank Indonesia on August 18-19, unexpectedly for some market participants, concluded its hiking cycle, leaving the rate at 5,75%. Such a pause was made possible by an improvement in the situation with the rupiah: pressure on the currency has eased, which gave the central bank room to maneuver. At the same time, inflation remains under control — at 2,88% year-on-year in July, within the target range of 2,5±1%. Nevertheless, geopolitical risks and energy price volatility remain at the center of the regulator's attention.
Mixed signals in the rest of the region. The Central Bank of Colombia held its rate, pointing to risks from the escalation of the conflict in the Middle East and the El Niño phenomenon, which could increase inflationary pressure. Chile left its rate unchanged for the fifth consecutive time, also showing clear caution amid growing geopolitical tension. Jamaica and Uruguay also kept their rates, citing a combination of external risks — the conflict in the Middle East and extreme weather events — as factors increasing the potential for inflationary pressure.
The overall picture clarifies the strategy of emerging market central banks: the majority prefer a wait-and-see stance, delaying fundamental decisions until the contours of the global economic cycle become clear. Easing in Brazil is more cautious than it seemed in the summer, and pauses in other countries reflect real concerns about export prices, currency stability, and the volatility of global financial conditions. The conflict in the Middle East and its impact on energy markets have become a clear factor in the region's monetary policy.
