The Board of the BCRA has decided today to raise the monetary policy rate by 950 basis points. This way, the APR on 28-day liquidity bills (LELIQs) rose from 60% to 69.5%.
Simultaneously, in order to increase savings in pesos, the Board of the BCRA has raised the minimum limits of interest rates on natural persons’ time deposits. The new floor for 30-day time deposits up to ARS10 million is 69.5% APR.
For all other private sector time deposits, the minimum annual rate is 61%. After two months of a downward trend in inflation, prices accelerated in July within a context of increased domestic financial volatility, adversely affecting inflation expectations.
Hence, the BCRA deems it necessary to increase once more the monetary policy rate and accelerate the process to normalize the structure of lending and deposit interest rates to ensure a positive yield in real terms, in line with the “Objectives and Plans for 2022” established in December 2021.
The rise in the policy interest rate will contribute to reducing inflation expectations for the rest of the year and to consolidating the financial and foreign exchange stability reached after the disruptive events of the past two months that led to the BCRA’s participation in the secondary market of government securities.
Within the framework of the process to normalize monetary policy, the BCRA will continue calibrating the policy interest rate paying special attention to the past and prospective development of the general level of prices and the forex market dynamics. In this sense, the effective annual rate on 180-day LELIQs is lower than that on 28-day LELIQs, projecting a slowdown in inflation.
In order to enhance the transmission of the monetary policy rate to the different sectors of the financial system and the capital market, mutual funds will be able to carry out repo transactions with the BCRA.
In addition, coordinated efforts with the Argentine Ministry of Economy have been intensified to ensure reasonable spreads between the BCRA’s interest rate structure and the National Treasury bills.
