07:06 AM EST, 11/07/2024 (MT Newswires) -- Brazil's central bank (BCB) Copom raised the Selic rate on Wednesday by 50bps to 11.25% as expected while quite explicitly linking future rate hikes to progress on fiscal matters, noted Societe Generale.

The BCB statement caters to market sentiment and pushes the Brazilian government to improve the fiscal outlook, wrote the bank in a note to clients.

At the same time, the statement hopes that spending cut measures, due to be announced in the coming days, will have a positive impact on market sentiment and lead to improved inflation expectations and eventually reduced risk premiums, impacting the course of monetary policy, stated SocGen.

Like the BCB's approach, the bank too hopes for the same and believes that the Selic rate will probably peak at 12.0%. The risks to SocGen's forecast are probably still skewed to the upside.