ForecastingStocks

If the IPCA is Brazil's most important inflation number, the SELIC and the CDI are its most important interest rates. Almost every Brazilian fixed-income product is priced against one of them.

SELIC — the policy rate

The SELIC (Sistema Especial de Liquidação e Custódia) is the basic interest rate of the Brazilian economy, set by the Copom roughly every 45 days. It is the rate at which the government finances itself overnight, and it anchors the entire structure of borrowing costs in the country.

The headline figure is the SELIC meta (target) the Copom announces.
The actual traded rate, the SELIC over, hovers just below the target.

CDI — the private-market twin

The CDI (Certificado de Depósito Interbancário) is the rate at which banks lend to each other overnight. In practice it tracks the SELIC very closely — it sits a hair below it. The CDI matters because it is the benchmark for private investments:

A fixed-income fund or CDB advertised as "110% of the CDI" pays 1.1 times that rate.
"100% of the CDI" is the standard yardstick a Brazilian investment is judged against.

Why both rule your returns

When the SELIC rises, the entire universe of Brazilian fixed income — Tesouro Selic, CDBs, LCIs, money-market funds — pays more, which raises the bar that stocks and real estate must beat to attract capital. High SELIC periods tend to pull money out of equities and into safe, juicy fixed income.
When the SELIC falls, fixed-income returns shrink, pushing investors toward stocks and riskier assets in search of yield.

Understanding the SELIC/CDI level is therefore essential to asset allocation in Brazil: it sets the "risk-free" return everything else is measured against.