Argentina’s Central Bank (BCRA) Thursday increased interest rates to 42.5%, it was announced. The measure is consistent with recent talks between the Government of President Alberto Fernández and the International Monetary Fund (IMF).
The BCRA’s Board of Directors decided to raise the Leliq rate, the benchmark for the country's economy, by 250 basis points to a level of 42.5%, as a new step towards the restructuring of a US $ 45 billion debt to the IMF dating back to 2018.
The principle of understanding included, among other points, an agreement to have positive real interest rates, in addition to a reconstruction of public debt on the domestic front so as to reach the expected inflation rate, which in January was 50.7% yoy.
The BCRA has also confirmed exceptional policies from pandemic times were over it was now resuming the path of rate hikes.
This strategy is now being adjusted in order to establish a policy interest rate path in order to tend towards positive real returns on investments in local currency and to preserve monetary and exchange stability, the BCRA said in a statement.
The BCRA has also created a 180-day liquidity note (Notaliq), it was announced. As per Thursday’s decision, the Leliq rate at 28 days will have a nominal annual yield of 42.5%, while at 180 days it will have a yield of 47%. The Notaliq will have a variable rate, equivalent to the effective annual yield of the Leliq at 28 days.
BCRA CEO Miguel Pesce had announced they were going to wait for January’s CPI to be relased before deciding on adjusting interest rates. Central Bank reserves are at their lowest level since 2016
“In line with the rise in the monetary policy interest rate, in order to promote its full transmission to the return of time deposits in pesos, the Board of Directors of the BCRA raised the minimum limits of interest rates on fixed terms,” the BCRA statement also stressed.