ARGENTINA

On January 6, the Central Bank of Argentina (BCRA in Spanish) issued a set of decisions that imply a redesign of “monetary policy instruments” with the aim of “reinforcing macroeconomic stability conditions”. Among the measures announced this afternoon, it is worth mentioning the increase of fixed term deposits rates to 39% and Leliq rates to 40%. You may access the Reference Communication by clicking here. On the other hand, the monetary authority released the “Objectives and plans regarding the development of monetary, exchange, financial and credit policies for the year 2022”. The document can be accessed by clicking here.

Through a Press Release (link), the Central Bank announced measures that seek a “reordering of the interest rate scheme and a simplification of the organization of systemic liquidity”. Specifically, it established an increase of 2 percentage points in the interest rate of the 28-day term Leliq, from 38% to 40% per annum. It was also decided to expand the maximum limit for the holding of 28-day term Leliqs up to an amount proportional to the stock of term deposits of the private sector of each financial institution.

On the other hand, the monetary authority created a new 180-day term Leliq with an annual rate of 44%. The stated objective is to “initiate a process of migration of sterilization towards longer maturities, as well as to extend the BCRA’s reference rate curve”. In addition, the entity raised the minimum interest rate ceilings on fixed maturities. For individuals, the new floor was set at 39% per annum for 30-day deposits, while for the rest of the depositors of the financial system the minimum guaranteed rate is 37% per annum.

At the same time, in the Objectives and plans regarding the development of monetary, exchange, financial and credit policies for the year 2022, the entity estimated that “an early agreement with the IMF” will serve to “improve the expectations of those actors that condition their vision regarding the sustainability of the external sector to the result of such negotiation, contributing to contain exchange rate pressures and inflation expectations”. 

The Central Bank emphasized that in 2022 “it will continue with a prudent management of the regulatory framework in force in the Foreign Exchange Market, adapting it to the needs of the situation, in order to preserve monetary and exchange rate stability”. And it adds that “as macroeconomic conditions allow, regulations will be made more flexible, with the objective of maintaining in the medium and long term a set of macroprudential regulations compatible with the dynamization of capital flows oriented to the real economy”.

 They also indicated that “the pace of depreciation of the domestic currency will be adjusted so as to stabilize the real exchange rate, in order to maintain the external competitiveness of the economy and thus promote the accumulation of international reserves, based on the genuine inflow of foreign currency from the external sector”.