The Board of the BCRA has adopted a set of measures to redesign monetary policy instruments with a view to continuing supporting recovery and getting better conditions for monetary, foreign exchange and financial stability. Such decisions are meant to rearrange the scheme of interest rates and streamline the management of systemic liquidity.
Firstly, the interest rate on 28-day liquidity bills (LELIQs) has been raised by 2 percentage points, from 38% to 40% annually. The maximum holding of 28-day LELIQs has been raised to an amount proportional to the stock of private sector’s time deposits at each financial institution. The BCRA has also issued a new 180-day LELIQ at an annual rate of 44%. Auctions will take place twice a week for 28-day LELIQs, and once a week for 180-day LELIQs. These changes will contribute to migrating sterilization to longer maturities, and to extend the curve of the BCRA’s benchmark rates. As for shorter-term instruments, 7-day repos will be gradually removed, and overnight repos will continue to be used.
The 28-day LELIQ rate will continue to serve as the reference indicator for the monetary policy. This measure will be supplemented by the BCRA’s participation in the secondary market of government securities in order to align the term structure of interest rates and to ensure the liquidity of these instruments.
The Board has raised the minimum limits of interest rates on time deposits—in line with the rise in the monetary policy interest rate—in order to encourage full transmission to returns on time deposits in pesos. The new floor annual rate for 30-day individuals’ deposits is 39%, whereas the minimum annual rate for the other depositors of the financial system is 37%.
The new monetary policy rate is consistent with the BCRA’s Objectives and Plans for 2022, where the path of the policy interest rate is set to obtain positive real returns on investments in domestic currency, and to preserve monetary and foreign exchange stability.
The factors that have influenced the general level of prices are expected to subside along 2022. Both the foreign exchange and interest rate policies, along with prudent management of liquidity, will help to improve foreign exchange expectations.
