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What is the Selic Rate?

The so-called Selic rate appears to us in many places, such as newspapers and investments. However, not everyone knows what this term is, and what its place is within the country’s economy.

Anyone interested in investments should know everything about the Selic rate and what it is for. But it needs to be studied in fact and understood in its smallest details. if you want to understand then what it really is and what its purpose is.

What this article covers:

What is the Selic Rate?

The Selic rate, or simply Selic, is the representation of the basic interest contained within the Brazilian economy. Because of this, the Selic is always discussed and becomes news, as it is something variable, it can increase or decrease over time.

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The Selic is able to influence all interest rates that exist in the country, such as loans and financing carried out by banks. The meaning of the word Selic is Special System of Settlement and Custody, which consists of a virtual program created for the purchase of National Treasury securities.

What is the current Selic Rate?

The Selic rate is highly variable and can be measured every month. Currently, the Selic is at 13.75% (until the closing of the text). Its definition was officially generated on August 3rd. With that, it was considered high, since in the previous month it was 13.25%. According to the Monetary Policy Committee (Copom), this was the tenth consecutive rise in the country.

For those looking for the current Selic Rate, it can be verified in its smallest details on the Central Bank website. In this environment, in addition to obtaining more information about the Selic, it is also possible to identify its changes through a graph that demonstrates all the year’s variations and the effects of their changes.

What is the Selic Rate used for?

Since 1979, the Tax has been an important tool for controlling inflation in Brazil. With its use, it is possible to clearly identify when the Central Bank makes changes that result in rising or falling inflation.

In addition, it also serves to be able to slow down the economy when it increases, which does not allow inflation to become higher, and still stimulates consumption when it is low.

How is the Selic Rate determined?

The country’s Selic rate is determined through meetings held by Copom. These meetings take place every 45 days and during the meetings studies of the entire Brazilian economy, inflation and also new projections are discussed.

How the Selic Rate is determined
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When the meeting is concluded, the Copom is responsible for publishing the real reasons that made the Selic Rate decrease or increase that month. In these publications, there may also be forecasts of the future economic scenario and Selic movements.

What factors influence the Selic Rate?

To accurately define the Selic, the Copom takes into account several factors. Among them, the main one is the profile of all federal public bonds, current level of employment and income of a large part of the population.

However, the main factor that determines the country’s Selic Rate is the current level of inflation within the economy. For example, the higher the inflation, the higher the Current Rate level. In case of low inflation, the Selic will be lower.

Therefore, any definition of the Selic must be based on observations of the level of inflation and other aspects that are decisive. The Copom is officially responsible for this analysis and aims to preserve the level of inflation within the target established for the year.

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