What is the SELIC rate and its impact on the economy

SELIC - Special System of Settlement and Custody is a mechanism used by COPOM - Committee on Monetary Policies to direct the economy. Observing SELIC fluctuations over the years helps in understanding economic and monetary policies.


Basically, it can be said that the SELIC is the basic interest rate of the Brazilian economy, and all other rates applied by banks, creditors and financial institutions are calculated based on it.


The entire history of SELIC can be accessed on the Central Bank's website, which has been publishing information since 1996. In the late 1990s, SELIC reached a target of 45% per year and over the following decade, the interest rate it gradually dropped and continued until the end of 2009. Between 2010 and 2017, it was between 7% and 14,25% per year and has been falling since then.


But how to interpret these numbers? In the direction of the economy, when the interest rate is high, credit becomes more expensive in the market, as banks and creditors base the cost of your loans and products at SELIC rate. If the cost of credit is high, people consume less and the economy slows down. The opposite also occurs, with lower credit, consumption is stimulated and the economy is heated.


Some fixed income financial investments also are indexed to the SELIC rate, such as Treasury Direct and Savings. However, as the SELIC is the market's basic interest rate, all other remunerations tend to be based on its fluctuations.


According to Central Bank projections for SELIC through the Focus Bulletin, published in August of 2022, market consensus continued by the 9th week followed by 13,75%. A month ago, the percentage was already 13,75%. Likewise, the median for SELIC at the end of 2023 remained at 11,00%, up from 10,75% four weeks earlier. Also according to the Focus Bulletin, the forecast for the Selic at the end of 2024 remained at 8,00%, the same percentage as a month ago. The median for the end of 2025 was maintained at 7,50%, repeating the rate of four weeks earlier.

Get in touch with TATICCA – ALLINIAL GLOBAL, which works with integrated auditing services, internal auditaccounting, tax, corporate finance, financial advisory, risk advisory, technology, business consulting and training, for more information, visit www.taticca.com.br or e-mail taticca@taticca.com.br and learn more. Our company has certified methodologies for carrying out activities.