New Framework for Short-Term Benchmark Interest Rate Curve

The BCRA Sets the Regulatory Framework to Develop a Short-Term Fixed Benchmark Rate Yield (or Liquidity) Curve

The Board of the BCRA has established the regulatory framework that promotes short-term liquidity management by replacing BCRA's remunerated liabilities for Treasury securities. This decision aims at streamlining the necessary tools for the development of liquidity and domestic credit markets.

The regulatory change enables the BCRA to draw on an additional resource to regain control of monetary programming. The downward sloping trend of the primary creation of money through the fiscal anchor has been essential in the disinflation process. In addition, the BCRA will continue reducing other sources of issuance that adversely affect monetary programming.

The Board established that securities acquired in primary subscription within the bill auctions program at a fixed rate, as announced by the Ministry of Economy, will be excluded for calculating lending to the public sector up to the amount determined for each institution. The amount is set according to each institution's reverse repo stocks as of May 15, 2024.

The changes in progress will contribute to strengthening stability and will leave room for the development of private lending, leaving behind a scheme in which the BCRA was the main source of remuneration for transactional monetary stocks. The allocation of financial resources through transparent pricing mechanisms is essential to the normalization of financial intermediation.

The systematic drop in inflation expectations by market analysts (through the REM) and that discounted in the prices of instruments in the financial market evidence the current convergence to macroeconomic stability. The BCRA anticipates that, thanks to greater macroeconomic stability, a recovery of the demand for the monetary base will contribute to the process of making financial intermediation more efficient. Given the impact of financial innovation on means of payment, the monetary base is expected to include “digital” money.

May 16, 2024