Banker explaining interest rate to a client

Understand how the Selic rate influences your investments and loans in Brazil.

About this subject

The Selic rate is Brazil's benchmark interest rate, set by the Monetary Policy Committee (Copom) of the Central Bank. It serves as a reference for all other interest rates in the country, impacting everything from savings account yields to the cost of a mortgage. When Copom raises the Selic rate, the goal is to curb inflation by making credit more expensive and discouraging consumption. Conversely, when it lowers the rate, it aims to stimulate the economy by making loans cheaper and encouraging investment.

For investors in fixed income, the Selic rate is crucial. Instruments like Tesouro Selic and post-fixed Certificates of Deposit (CDBs) directly track this rate. Historically, the Selic has peaked at over 14% per year during inflationary crises and reached historic lows below 2% during the COVID-19 pandemic. This volatility requires investors and borrowers to monitor Copom decisions, which occur every 45 days.

On a daily basis, the Selic rate affects the yield of savings accounts, which is capped at 0.5% per month when the Selic is above 8.5% per year. It also influences the interest rates on overdraft facilities and revolving credit cards, among the highest in the world. Understanding the Selic rate is essential for anyone looking to make more informed financial decisions, whether investing or taking out a loan.

Frequently Asked Questions

What is the Selic rate and who sets it?

The Selic rate is Brazil's benchmark interest rate, set by the Monetary Policy Committee (Copom) of the Central Bank.

How does the Selic rate affect fixed-income investments?

Investments like Tesouro Selic and post-fixed CDBs have their yields tied to the Selic rate. When the Selic rises, these investments yield more.

What is the relationship between the Selic rate and inflation?

Copom raises the Selic rate to curb inflation, as higher interest rates discourage consumption and credit. It lowers the Selic to stimulate the economy when inflation is low.