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| Selic | |
|---|---|
| Name | Selic |
| Country | Brazil |
| Institution | Central Bank of Brazil |
| Introduced | 1986 |
| Rate type | policy interest rate |
| Benchmark | overnight repo rate |
| Target | inflation targeting |
Selic is the shorthand designation for Brazil's benchmark overnight interest rate administered by the Central Bank of Brazil. It functions as the principal monetary policy instrument within Brazil's inflation targeting framework and interacts with financial markets including the Brazilian Interbank Deposit Certificate, Bovespa, and the National Treasury of Brazil. The Selic rate guides short-term funding costs across banking, sovereign debt, and corporate financing in Brazil's capital markets such as the Tesouro Direto and influences macroeconomic variables tracked by institutions like the International Monetary Fund, World Bank, and Organisation for Economic Co-operation and Development.
The Selic rate is operationalized via repurchase agreements in the Brazilian overnight market, settled through the Sistema Especial de Liquidação e de Custódia (SELIC system). Market participants include Banco do Brasil, Itaú Unibanco, Bradesco, Santander Brasil, and other domestic and international banks active in B3. The Monetary Policy Committee (COPOM) within the Central Bank of Brazil sets the target Selic rate in regular meetings, coordinating with fiscal agents such as the Ministry of Finance (Brazil) and the National Treasury Secretariat to manage public debt auctions and liquidity. Historical data and projections are cited by organizations including the Institute for Applied Economic Research (IPEA) and the Brazilian Institute of Geography and Statistics (IBGE).
The Selic framework evolved from Brazil's high-inflation era and successive stabilization plans including the Plano Cruzado, Plano Bresser, and Plano Real. The SELIC system was established to centralize government securities settlement and underpin monetary control after reforms in the 1980s and 1990s. During episodes such as the 1999 Brazilian currency crisis and the 2008 global financial crisis, Selic adjustments were used alongside fiscal measures by the Ministry of Finance (Brazil) and interventions in the foreign exchange market. In the 2010s and 2020s, episodes involving the 2014 Brazilian economic crisis and policy shifts under administrations of presidents like Luiz Inácio Lula da Silva and Jair Bolsonaro featured prominent Selic decisions affecting inflation expectations tracked by the Central Bank of Brazil and commentators at the Brazilian Development Bank (BNDES).
COPOM convenes regularly to set the Selic target, relying on macroeconomic models and inputs from institutions such as the International Monetary Fund, World Bank, Institute of International Finance, and domestic think tanks like IPEA. Operationally, the SELIC system settles repurchase operations using securities issued through auctions by the National Treasury of Brazil and traded in markets dominated by B3. The mechanism links to policy instruments used by other central banks—comparative frameworks include the Federal Reserve System, the European Central Bank, and the Bank of England—while taking into account capital flows influenced by actors like BlackRock, Vanguard Group, and Goldman Sachs in Brazil's bond and equity markets. Legal and institutional constraints derive from statutes enacted by the National Congress of Brazil and oversight by the Federal Audit Court (TCU).
Changes in the Selic rate transmit through banking spreads set by Banco do Brasil, Caixa Econômica Federal, and private banks such as Itaú Unibanco and Bradesco to affect credit markets, mortgage costs, corporate borrowing, and sovereign debt yields on instruments like LTN and LFT bonds. Pass-through influences consumption, investment, exchange rate movements vis-à-vis the U.S. dollar, and asset prices on B3. Empirical analysis by academic centers like the Getulio Vargas Foundation (FGV) and universities such as the University of São Paulo (USP) and Federal University of Rio de Janeiro (UFRJ) highlights channels including interest-sensitive spending, expectations anchored by IBGE inflation reports, and portfolio rebalancing by institutional investors like Previ and FUNCEF.
Scholars and policymakers debate Selic's role vis-à-vis fiscal policy enacted by the Ministry of Finance (Brazil), with critiques from commentators at Folha de S.Paulo, O Estado de S. Paulo, and academic papers from FGV and IPEA questioning procyclicality, distributional impacts, and interactions with public debt dynamics overseen by the National Treasury of Brazil. Debates also compare Brazil's reliance on Selic to alternative frameworks used by the People's Bank of China and emerging market central banks, with analyses by the World Bank and International Monetary Fund addressing capital flow volatility, macroprudential measures by the Central Bank of Brazil, and the role of discretionary interventions in the foreign exchange market.
Time series released by the Central Bank of Brazil show Selic peaks during episodes like the 1994 Plano Real implementation and the 2015–2016 recession, and troughs following coordinated easing during the 2008 global financial crisis and the COVID-19 pandemic response. Recent COPOM cycles reflected inflation dynamics reported by IBGE, expectations surveyed by the Brazilian Financial and Capital Markets Association (ANBIMA), and external conditions referenced by the U.S. Federal Reserve. Analysts at institutions such as Goldman Sachs, JPMorgan Chase, and Itaú Unibanco provide forecasts that inform market pricing in interbank and sovereign securities auctions on B3.
Category:Monetary policy of Brazil