Fixed term: for Caputo, the era of negative real rates is over, but will it reach the saver?

The Consumer Price Index (CPI) for May was 4.2% as revealed by the National Institute of Statistics and Censuses (INDEC) and The year-on-year figure was 276.4%. The organization released the data this Thursday, June 13 and, now, the market begins to analyze what will happen with the monetary policy rate, like every time the inflation number is known, but this month, there is additional data and it is that he Minister of Economy, Luis CaputoHe said yesterday, within the framework of Expo EFI that “the era of the negative real rate is over.”

As explained the economist of the Scalabrini Ortiz Center for Economic Studies, Federico Zirulnik“these statements by Caputo have to do with the fact that, until a couple of weeks ago, the monetary policy rate was behind the inflation and with the objective of liquefying the entire stock of pesos and the liabilities of the Central Bank (BCRA).” This aimed to encourage the migration of banks from repos to Treasury bills.

The Bausili and Caputo rate policy

Little by little, this objective was achieved and the reference rate began to be that of the LECAPwhich yield 4.2%/4.5% in the short term and, “after the last Treasury tender, which was this Wednesday, June 12, and with the May inflation data on the table, it became real positive,” according to the economist.

Let us remember that the BCRA has been sharply lowering the monetary policy rate (the repo rate) and recently took it to 40% nominal annual rate. That is equivalent to a 3.3% monthly effective yield. Banks take the first value as a reference when making the fixed term profitable and are paying less than 3% per month in some cases. That made many savers decide to get out of income in pesos and will migrate towards the dollarso there was a small exchange rate run.

With this information on the table, Ignacio Zorzoli, Director of Finance of the Argentina XXI Center for Economic Studies (CEEAXXI), explains that “the idea that Minister Caputo put forward is that the monthly inflation, which we have just learned according to the INDEC, of ​​4.2% per month, is below, for example, the monthly bidding rate of Lecap, which is in 4.25%”.

Fixed term: a positive rate that does not benefit the saver

“However, even with this May inflation (it is unlikely to be sustained in June), the real rate for savers is negative,” warns the director of MyR Consultores, Fabio Rodríguez. And he points out that only large investors in medium-term bills are above the inflation record.

He says that the Government’s objective is to influence expectations so that the market “buys the disinflationary slide and convergence and consistency with a crawl of 2%.”

Happens that, In March, the Lecap rate lost almost 100% against inflation and May was the first month in which inflation was below that index. which is why he highlights that “we can now talk about positive real rates.” But he clarifies that “in any case, it is not a guarantee that rates will not continue to fall, since the BCRA’s underlying plans, in terms of dollarization and currency competition, could continue to drive them downward.”

How the rate path will continue

In the same line, Andrés Reschini, analyst at F2 Soluciones Financierasmaintains that, “in line with what Caputo stated, the negative rate is ending because, with the May CPI data, the spread between the repo index and the inflation index is approaching zero”, indicating that the strategy liquefaction process would be coming to an end.

However, everything depends on how much the government manages to maintain its course, since, as Zorzoli indicates, although the Government’s objective now is to once again encourage credit and, thus, promote the economic reactivation that urgently needs to be observed in the second semester to solve the collection, which will be reduced by the reduction of the PAIS Tax, whether it is achieved or not “will depend on how inflation continues in the coming months.”