The Central Bank held, on Tuesday (18), the first stage of the meeting of the Monetary Policy Committee (Copom). At the meeting, which only ends on Wednesday (19), the executive committee will decide the basic interest rate (Selic) for the Brazilian economy.

This interest is important for the economy to be a reference for investment. They are considered the lower rate of return, ie, when a business owner decides to take a part of the project, it evaluates whether the project income is higher or lower than this base rate.

If the return is lower, it does not take the cassette design and apply the money on papers National Treasury, which pay interest close to this value set by the Central Bank. It may also invest in other financial products.

Loans and financing

This basic rate also has a direct influence on how much a consumer pays for loans and financing. When the Fed changes the value it also changes the cost of banks to raise funds, money which will then be loaned to customers.

If the cost of the bank rises, the loan is also more expensive for the consumer. If the low rate, this also low cost. The basic interest rates still have a great importance because they help control inflation. When the central bank raises the Selic, it means that it is acting to bring prices down.

Market expectations

For the Copom meeting taking place this week, analysts are betting that the central bank will cut the rate by 0.25 percentage point, to 14% per year.

If the scenario designed by the market in the Focus Bulletin is confirmed, this will be the first decline in the rate since October 2012, when the Central Bank began to Selic 7.50% pa to 7.25%.

Source: Portal Brazil, Central Bank information