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%.