The Board of Directors of the Central Bank (BCRA) confirmed that will reduce the interest rate of the Fixed deadlines traditional 30 days. In this way, the Annual Nominal Rate (TNA), which remained at 133%, will provide a performance of 110% on new deposits that are made, that is, they will have a rate of 9.15% monthly.
1. Inflation for the coming months
From the consulting firm Equilibra they project “a monthly average inflation of 25% in December, January and February, which will strongly deteriorate the purchasing power of the salary”. “In fact, The fall in real wages in December could exceed the monthly record of decline of around 9% verified in April 2022. We believe that the formal salary will seek to recover part of what was lost and will climb to a higher nominal value in January-February. Anyway, The fall in real wages would rise by at least 8% between November and February 2024”, analyzed from the firm.
The consultants estimate that in the remainder of December the inflation will deepen. The transfer of prices will be reflected in the CPI for the last month of the year due to the jump in the wholesale exchange rate of 118%.
Added to the adjustment of prices in mass consumption products and fuels derived from the disarmament of the program Fair Prices and for the increase in meat.
According to these very high inflation projections for the next three months, the traditional fixed term which would yield 9.15% monthly, will lose against inflation.
2. UVA fixed term: the effect of lower rates
With this decision, surely, a large part of the pesos that today are in a traditional fixed term will go to the UVA, which the BCRA is supporting. The same could go towards parallel dollars, but according to Scopeor the economist Federico Glustein, “due to the strong inflationary peak that is expected in the coming months (December, January and February) term deposits tied to that variable they are going to be one better coverage for the saver”.
In this framework, the central bank urged banks to continue offering this alternative despite the banks’ request to discontinue the UVA fixed term. The BCRA evaluated that “it is necessary for the banking system to continue offering the public” fixed-term deposits adjustable by UVA.
According to the economist Cristian Buteler through his X (former Twitter), he recommended: “Does the fixed term expire today? -Traditional fixed term rate 9% monthly, expected inflation 30/40% (loss between 16% and 22% every 30 days) –Or you go to a fixed term UVA (90 days minimum period) or take advantage of going to dollar before it rises again.
3. What is a UVA fixed term and how can it be updated?
The UVA fixed terms are fixed terms that adjust for inflation, through the formula UVA+1%. It is a deposit in pesos for at least 90 days up to 365 days that adjusts the rise in inflation plus a rate of 1% annually.
There are two formats, the traditional one and the pre-cancellable one. Within this second option what changes is that the BCRA decided eliminate the minimum pre-payment rate for UVA fixed-term loans, which means that the conditions will now depend on the banks.
Furthermore, the UVA fixed term follow the evolution of price increases. When establishing the fixed term, it is done in Purchasing Value Units updateable by “CER” (UVA), so, at the end of the term, The amount of UVA is paid at the current value plus a small interest of around 1%.
The UVA value is updated daily and its value can be consulted on the website of the Central Bank of the Argentine Republic (BCRA).
4. Dollar
After Caputo’s announcements, the markets They reacted positively. The Dollars Financial institutions barely reacted and the gap went from 170% to 20% on average.
“Everything indicates that the economic authorities will want to avoid a new exchange rate jump during the summer, since the risk of inflation reaching 50% monthly – the threshold that usually defines hyperinflation – would be high. Therefore, it is likely that the BCRA will accelerate the rhythm of the crawling peg after December-January to arrive with a competitive real exchange rate in the fall, the time of departure for the liquidation of the coarse harvest (which would leave US$10,000 million more than this year if the weather continues to be favorable) “, they express from Equilibra. For savers, a dollar at these levels It may be an option in addition to UVA.
Source: Ambito
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