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First, we need to understand what the Selic rate is: The Selic Rate, or Special System for Settlement and Custody, is an important tool of Brazilian monetary policy. Controlled by Central Bank, this rate directly influences the country's economy, affecting interest rates, credit, investments, and inflation.
The Selic Rate is determined by the Monetary Policy Committee (COPOM) at periodic meetings, which assess the country's economic conditions and make decisions about the rate. In addition to being used as a reference for loans, investments, and savings, it also influences Brazil's entire financial system.
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How it works
The Selic Rate works simply: when the Central Bank wants to increase economic growth, it is reduced. This makes credit cheaper, stimulates consumption and investment, and makes government bonds less attractive, directing investments toward the private sector.
On the other hand, to control inflation or stabilize the economy, the rate is increased, making credit more expensive and slowing economic activity.
With higher rates, government bonds become more attractive, encouraging investments in financing. However, this measure may discourage private investment, reducing economic growth.
It is important to emphasize that changes in the Selic rate directly affect Brazilians' finances. Lower rates mean lower interest on loans and financing, making access to credit easier.
On the other hand, higher rates result in higher interest, making loans more expensive and affecting household consumption.
How the Selic rate affects Brazilians' lives
In summary, whenever you intend to invest in products offered by the Government, take out a loan or payroll-deducted loan, buy a home or car, or obtain any bank financing, it is important to pay attention to updates to the Selic rate so that your financial transaction is carried out at the right time and you do not pay higher interest.
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