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By Ana Paula de Araujo, Multimedia Journalist for Women's Finance – Para Yubb
It is wrong to think that SELIC's rate only serves to measure the profitability of the Treasury Direct. This has to do with inflation, the rise or fall of the dollar, the profitability of investments and even with the interest rate you pay to apply for a loan. In order for you to understand this important concept of economy, we have prepared a plain language manual.
What is the SELIC?
This is only the basic interest rate of the Brazilian economy.
Being the SELIC rate
Being the base interest rate of the SELIC rate
What is the SELIC rate? country is a parameter for other market interest rates – and here we include everything from return on investment, especially fixed income, to interest charged by financial institutions when granting credits.
SELIC is at a high level, it discourages consumption, business investment and avoids the economy of the population, because the financial investments related to this rate pay well when they increase. On the other hand, with a low rate, people are encouraged to consume and, in theory, entrepreneurs get credits with interest rates.
Get the best news and badysis from Monday to Friday.
Get the best news and badysis from Monday to Friday.
Rates SELIC and inflation
Get the best news and badysis from Monday to Friday.
For the reasons mentioned above, the SELIC is an economic policy tool to control inflation: when it is high, the Central Bank raises the SELIC rate. This discourages production and consumption, thus helping to "restrain" price increases.
However, if inflation shows signs of slowing, the rate could begin to fall, which would boost consumption and production. and growth. Still do not understand very well? So we suggest you take a look at this article, where we explain everything about inflation.
How does the SELIC rate affect your investments?
If you apply in Treasury Direct, you know that this rate is the basis of the Treasury's profitability. SELIC. It also helps you to score fixed rate securities.
The SELIC rate also serves as a reference for the CDI, a rate used by banks to lend money and which determines the profitability of a large part of private fixed income investments. I bet you heard that an investment was worth more than 100% of the IDC!
So, the higher the SELIC, the higher the financial investment results? It depends.
Real profitability must be taken into account, that is the difference between the return on investment and inflation. The account is:
Interest Rates – Inflation – Investment Rates = Real Profitability
So, if inflation is high, it will not be yours useful if your money will cost less. SELIC is currently 6.5% per year: the real profitability remains attractive, with inflation showing signs of slowing down.
It is also important to badyze the rates charged for the chosen investment. A simulation conducted by Anefac (National Association of Finance, Administration and Accounting Officers) showed that with the SELIC rate of 6.5% per annum, the savings account is more profitable than a series of fixed income funds, especially with administration fees of more than 1% per annum.
Before you wring your nose, remember that saving is a good option to keep your fund in an emergency – this money is reserved for the unexpected. But there are CBDs with daily cash which fulfill this role!
How to choose your investments based on the SELIC rate?
In fact, the composition of your investment portfolio is more dependent on your investor profile, available capital and term for redemption than the SELIC threshold itself. However, it is worth keeping an eye on economic projections to choose the most profitable applications based on all these factors.
The market predicts that the SELIC rate will reach 8% by the end of 2019, according to the Focus newsletter. Central bank.
SELIC and dollar rate
Our SELIC is currently at the lowest level of history. But the US central bank raises interest rates in this country. In other words, Brazil is becoming less attractive to investors around the world, who prefer to invest their resources in the United States. With this capital flight, the dollar is also rising. The rising dollar is directly affecting inflation, which is putting pressure on British Columbia to raise interest rates.
Conclusion
Have you seen how the SELIC rate has a direct influence on your life? Whatever the expected increase, keep an eye on the news: the SELIC rate is a key part of our economic system and any change will dramatically affect your life.
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