Decisions Taken by the Monetary Policy Council (COPOM)

July 22, 2019. In line with the two-month calculation of minimum reserve requirements established by the Board of the BCRA on June 19, the Monetary Policy Council (COPOM) of the BCRA has decided to make a two-month assessment of the compliance with the monetary base target for July and August. The average target for this period remained unchanged at ARS1,343 billion.

As a preventive measure, in July banks have been complying with minimum reserve requirements for a higher amount than that required for the July/August period, which suggests that they will fulfil requirements for a lower amount in August. In order to avoid excessive contraction in July and excessive expansion in August, the COPOM has decided to determine, during July and August, the compliance of the monetary base target based on the two-month average.

In addition, in order to ensure the contractionary bias of the monetary policy, the COPOM has decided to keep the interest rate on liquidity bills (LELIQs) stable at 58% until the next inflation rate becomes known. Only then, the minimum interest rate on LELIQs could be reviewed in terms of the development of inflation, inflation expectations, domestic and foreign financial conditions, and other macroeconomic variables.

Also, in order to improve the transmission of the interest rate on LELIQs to the interest rate paid to depositors, the Board of the BCRA decided, on July 19, to increase by 3 p.p. the portion of minimum reserve requirements that institutions are allowed to comply with through LELIQs. Non-remunerated minimum reserve requirements restrict deposit yields because they open up a gap between the monetary policy interest rate and the interest rate paid to depositors.

The measures described here have been adopted with the unanimous approval of all COPOM members. The COPOM is composed of Guido Sandleris, Governor; Gustavo Cañonero, Deputy Governor; Verónica Rappoport, Alternate Deputy Governor; Enrique Szewach, member of the Board appointed by the Board of this Central Bank; and Mauro Alessandro, Economic Research Deputy General Manager.


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