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SocGen Comments on Brazil Central Bank's Surprise Rate Hike This Week

BY MT Newswires | ECONOMIC | 06/20/25 08:02 AM EDT

08:02 AM EDT, 06/20/2025 (MT Newswires) -- Brazil's central bank (BCB) unexpectedly raised the policy rate by 25bps to 15.0% on Wednesday, noted Societe Generale.

The BCB also signaled a pause in its tightening cycle to evaluate the cumulative impact of past hikes, but warned it is prepared to raise rates further if necessary, wrote the bank in a note to clients.

The decision, along with the hawkish statement, reinforces the BCB's inflation-fighting credibility, stated SocGen.

The bank believes the easing cycle will get underway in Q1 2026. Given the hawkish statement, SocGen raised its Selic rate projections for the forecast horizon, expecting year-end rates in 2026 and 2027 to reach 12.25% and 10.25%, respectively, compared with their earlier projections of 11.75% and 9.75%.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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