The Floor of the Interest Rate on LELIQs Keeps Decreasing Gradually

January 16, 2020. Today, the Board of the BCRA set a new reduction of the floor of the interest rate on liquidity bills (LELIQs) by 2 points, from 52% to 50%.

The decision was taken to favor a gradual decrease of the benchmark interest rate, in the framework of the current situation of macroeconomic and financial recovery, extension of terms on LELIQs, and the progress made regarding the Economic and Social Agreement and the Agreement on Preserved Prices.

The Board of the BCRA holds that monetary aggregates are at their all-time lows in terms of GDP and that nominal and real interest rates are still high, after the financial stress that led them to the highest levels since the 2002 crisis.

The recessive process in Argentine economy has already taken more than two years with no results shown on the price trend at a general level. In this scenario, the gradual decrease of the interest rate is expected to ease credit conditions and encourage economic activity.

High real interest rates were ineffective to create sustainable disinflation in the recent past. In 2019, the inflation rate reached 53.8%, the highest since 1991. The current inflationary process has a strong inertial component.

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