After seeing the CPI data for February, which recorded 6.6%, the The Central Bank decided to increase by 300 basis pointsi.e. 3 percentage points, the monetary policy rates, to bring them back to 78% annual nominal. This is also what fixed-term contracts will pay from tomorrow, Friday.
In this respect, the monetary authority acts in accordance with the requirement of the agreement between the government and the Monetary Fund International, which establishes the commitment to maintain positive real rates.
Thus, the reference rates of Liquidity Bills (Leliq) went from the 75% that had been fixed last September to an annual nominal of 78%, a return that also applies to fixed terms of 30 days and with a ceiling of one million pesos.
In light of escalating inflation, the BCRA raised the benchmark rate for the first time in six months
This rate of 78% is equivalent to a Annual Effective Rate (ATE) of 113.2% For fixed terms, if the capital is renewed from month to month plus accrued interest for one year. At the same time, the price of passive Passes, that of the investment line and that of the cards remained unchanged, according to sources from the Centrale.
In this sense, the the monthly yield of the traditional fixed duration becomes 6.41%slightly below the February inflation reported by the National Institute of Statistics and Censuses, which was 6.6%.
Lucas Yatchehead of strategy and investments at Liebre Capital, pointed out that “given inflation in February ex-post interest rates were not positive. Although LEDs have run above inflation in the secondary market”.
Yatche recalled that “the REM indicated that inflation in March would reach 6.3%, a level lower than that implicitly estimated by the market in the bond curves. We expect inflationary pressures to remain firm over the coming months. The BCRA’s intervention in the bond market will surely continue, as will the quasi-fiscal deficit and a possible issue of a new soybean dollar. Given the speed of money to all time highs over the past 20 years. The government should accentuate monetary and fiscal policy so that inflation evolves at a lower rate”.
As, Juan-Manuel Valentifinancial assets analyst at Wise Capital, explained that “in a context of high inflation like the one the Argentine economy is going through, it can be assumed that investing in a traditional CDD or a UVA CDD turns out to be an interesting investment.”
“The Central Bank will seek to maintain real interest rates, so we hope that if there is an increase in inflation, the BCRA will increase the fixed term rates and when the term expires, we can renew at these higher rates,” Valenti added.
Nicholas Chiesadirector of Portfolio Personal Inversiones pointed out that “as far as inflation is concerned here in Argentina, we are talking about a figure above 7% in March. Of course, its effect is felt and seen, with more than pressure on the exchange rate. My belief is that the official dollar should adjust, but as the elections are coming at the same time, we don’t know what can happen in the future. What is certain is that nobody imagines in the future that the gap will widen further.