Social Security under pressure: Government evaluates decoupling INSS adjustments from the minimum wage

The proposal to decouple INSS benefit adjustments from the minimum wage valorization policy marks a structural shift in fiscal management, highlighting the government's urgency to curb the growth of mandatory expenses. With the 12-month IPCA reaching 4.44% in July 2026, inflationary pressure on the federal budget has become a severe constraint on maintaining social spending without revenue offsets. This discussion, emerging amid fiscal deterioration noted in our analyses of the R$ 1.24 billion income tax refund, signals that the sustainability of the social security regime has entered a phase of forced revision, superseding political rhetoric. Currently, monetary policy imposes a high cost of capital, with the Selic rate set at 14.00% p.a., increasing public debt service and limiting budgetary room for maneuver. The dollar's trajectory, down 0.46% over the last 30 days to R$ 5.16, offers temporary relief for imported prices but fails to compensate for budgetary rigidity. The market remains cautious, as any change in calculation rules directly impacts the Social Security cash flow, which already faces a chronic structural deficit due to Brazil's demographic transition.