The Board of Directors of the Central Bank of Argentina (BCRA) has taken several measures to clarify and simplify the monetary policy rate signal.
Starting tomorrow, its monetary policy interest rate will be the one-day reverse repo rate, which since December 13 was set at 100% nominal per year.
In order to streamline its liquidity management scheme, the Board decided to discontinue future LELIQ tenders, with reverse repo operations becoming its main instrument for absorbing monetary surpluses.
By centralizing its operations in a single instrument, and with its policy rate being the sole benchmark interest rate, the aim is to make the monetary policy signal clearer and strengthen its transmission to the rest of the economy’s interest rates.
In the context of a significant surplus of liquidity and high inflation, the Board considered it prudent to maintain a minimum interest rate for fixed-term deposits, which it decided to set, through Communication A7922, at 110% nominal per year. Additionally, the Board considers it necessary for the banking system to continue offering the public fixed-term deposits adjustable by UVA. To provide predictability to the availability of resources, it decided to eliminate the minimum pre-cancellation rate of the latter.
Regarding liquidity injection operations, the BCRA will continue to exercise the possibility of carrying out active repos and offering puts on Treasury instruments that the BCRA considers appropriate. The Board ordered, through Communication A7921, that those securities that can be sold to the BCRA through the put mechanism will not be computed for the purposes of the credit splitting limit to the public sector.
