Learn how lower Selic rate will enable lower interest credit

It is no secret that Brazil has one of the highest interest rates in the world. In order to resume economic growth in the country and offer lower interest rates for access to credit, the Monetary Policy Committee (Copom) reduced the Selic rate to 5.5% per year.

The downturn affects the financial market from two fronts: fixed-income investors, who have to focus on diversifying investments to maintain profitability, and borrowers, with the chance to renegotiate their debt with lower interest rates.

In this post, you will learn more about the base interest rate that governs the economy and how its decline influences access to credit and investment. Keep reading!

How does the Selic rate work?

How does the Selic rate work?

The Special Settlement System of Custody, better known as Selic, is the reference interest rate and tracks inflation. When it is high, interest on loans is more expensive. When it’s low, you pay less interest for the money you borrow.

Recently, the Selic rate reached 5.5% per year, the lowest since the Real Plan in 1994. In search of a more sustainable economy, economists project more cuts by the end of the year, reaching 4.5%. % per year.

How does the Selic fall reduce interest rates?

The country’s economic and political scenario has a direct influence on raising or lowering interest rates. With the prospect of falling Selic rate, some banks have already announced the transfer of lower interest to their credit lines.

Good Finance has already announced the transfer of the cut as well as Banco do Brasil and Bradesco. Real estate financing is also with falling interest rates creating a good time for those who want to invest in home ownership.

What is the impact on credit demand?

What is the impact on credit demand?

The fall of Selic is seen as a path to the growth of the Brazilian economy and brings two main perspectives to the economic scenario:

  • Resumption of jobs and income generation;
  • Reduced default risk by demanding more credit for those in need of money and increasing banks’ confidence to lend.

This is a good time to make lower interest loans if you need money, or to renegotiate debts if you already have some financing or debts to settle.

What is the impact on investments?


Those who invest money in search of more profitability should look for alternatives in order to increase fixed income gains by diversifying investments with variable income investments and securities with longer redemption or inflation indexed terms.

Before setting, it is important that you take into account your investor profile, ie your acceptable risk levels and your short, medium and long term goals.

With the Selic rate falling and with lower interest rates, the economy tends to grow, while access to credit is simplified for the consumer, reducing debt, attracting investments and turning capital around.

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