The article discusses which is the best indicator to compare the performance of financial investments: the CDI or the IPCA. The answer presented is that the choice depends on the investor's goal.
The CDI is an indicator that tracks the Selic rate, which is a short-term interest rate adjusted by the Central Bank every 45 days. The IPCA, on the other hand, is an inflation index that primarily serves as a reference for the evolution of purchasing power in the long term.
In Brazil, the CDI is widely used for two main reasons. First, because banks prefer the CDI, since practically every banking product is tied to it, such as CDB, LCI, LCA, and savings accounts. Banks raise funds and then lend in transactions also tied to the CDI, investing the remainder in Treasury Selic. Second, because historically interest rates in Brazil have been well above inflation.
As a current example, the CDI is at 14% per year while the IPCA is at 4.5% per year. Over the past five years, the CDI has averaged 6% per year above the IPCA, a pattern that also repeats over 10- to 20-year periods.
