He Central Bank (BCRA) decided to keep the monetary policy rate unchanged at 118% annually, despite the spike in the inflation, which rose 12.4% in August. Thus, The fixed term had a lower return and it is expected that this trend will continue in the coming months.
How much does a fixed term yield in September 2023?
With this decision of the BCRA, The current yield of the fixed term remained in negative territory if compared against August inflation, it is already 9.7% monthly.
What do consulting firms say about inflation?
The projections of the main market consultants, which send their data to the BCRA itself, estimate a cost of living of 12% for September, a level that is still very high.
Specialists admit that in the final stretch towards the elections it is not an easy decision to raise the rate due to the cost that this measure implies in terms of higher credit prices, the impact on economic activity, and the deterioration of the Central Bank’s quasi-fiscal deficit. .
In this way, if interest rates continue unchanged upwards, investments in fixed-term deposits will not be profitable against inflation if the CPI remains above 10%.
Why didn’t the BCRA raise the interest rate?
The board of directors of the Central Bank opted for this decision to try not to continue increasing the debt of the monetary authority, which exceeded 20 billion pesos and is growing at a rate close to two billion per month.
The fact is that by raising the interest rate, the speed at which the BCRA’s liabilities grow increases, which fuels the expectation of inflation in the future and worsens the entity’s balance sheet.
The Leliq earn interest of almost $2 billion per month, approximately 20% of the monetary base.
This “Leliq ball” is considered by the opposition as the main economic challenge facing the government that will take office on December 10.
The reasons of the BCRA
To justify its decision, the BCRA explained that it makes its decisions looking at expectations, future inflation. And furthermore, they establish that the annual effective rate of 209% is positive compared to annual inflation.
According to the monetary authority, “high frequency indicators reflect a slowdown in the rate of increase in the general price level from the peak of the third week of August, which would have deepened so far in September.”
That is why it decided to maintain fixed-term rates, with which savers seek to protect the purchasing power of their holdings.
One of the questions that specialists are now asking is whether some savers could dismantle positions in pesos to use them to acquire “MEP dollars” or currencies in the numerous “caves.”
The BCRA said that the 12.4% inflation was “driven by the transfer to prices of the greater financial volatility recorded in the second half of the month and the recalibration of the level of the official exchange rate,” that is, the devaluation.
It indicated that it will continue to monitor the evolution of the general price level, the dynamics of the exchange market and monetary aggregates for the purposes of calibrating its interest rate and liquidity management policy.
In the Government they affirm that “although August inflation reached double digits, September’s inflation is more flat” and they attribute last month’s cost of living to the specific impact of the devaluation.
Source: Ambito
