The real interest rate is the return on an investment after discounting inflation for the period. It represents a true increase in the investor's purchasing power. An investment that yields 10% per year with inflation of 8% has a real rate of just ~1.85% — much less than it appears from the nominal number.

The Fisher Equation, developed by economist Irving Fisher, describes the mathematical relationship between nominal rate, real rate and inflation: (1 + nominal rate) = (1 + real rate) × (1 + inflation). For low rates, the real rate ≈ nominal rate - inflation approximation works well, but for high rates (like those in Brazil), use the exact formula.

With Selic at 14.75% p.a. (July 2025) and IPCA projected at ~5.0% p.a. for 2025, the implied real rate is approximately 9.3% per year — one of the highest in the world in real terms. This explains why Brazilian fixed income is so attractive to foreign investors in times of high Selic.

The IPCA (Broad Consumer Price Index) measures inflation for the final consumer and is the official inflation target index of the Central Bank. The IGP-M (General Market Price Index) includes producer, construction and consumer prices, and tends to fluctuate more. Use the IPCA to evaluate personal investments and the IGP-M for rental contracts (which often use this adjustment index).

The real rate is negative when inflation exceeds the profitability of the investment. This occurred with savings in several years in Brazil (2021-2022, for example, with inflation above 10% and savings yielding ~7%). Negative real rate means that money loses purchasing power — you can buy less with the same amount in the future than you can today.

Yes, if held until maturity. The IPCA+ Treasury pays IPCA + a pre-fixed rate (currently around 6-7% p.a. in real). This ensures that the investor always exceeds official inflation, preserving and increasing purchasing power. If sold before expiration, the price may be marked to market (positive or negative).

For debts (payroll loans, financing), the real cost is calculated in the same way: nominal loan rate discounted by inflation. If you have a loan at 25% p.a. with 5% inflation, the real cost is approximately 19% per year. This means that you are paying more and more in terms of purchasing power — a strong argument for paying off high-interest debts as quickly as possible.