Central Bank assesses hike in interest rates, in line with countries in the region


The Central Bank (BCRA) assesses increase the interest rate benchmark, one of the typical monetary tools for containing inflation. Despite the incessant rise in prices, it is fixed at 38% for over a year, but it will eventually be modified according to the countries of the region.

Until now, Martin guzman was reluctant to change the interest rate, understanding that the difference between his inflation target of 29% for this year and the current record of -45.4% in the cumulative of the first eleven months, as reported this Tuesday by Indec, is a consequence of the international rise in prices. However, this should have an impact on other countries, but they are not registering increases similar to Argentina.

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Although they are far from the INDEC records, most central banks of the region takes concrete measures of monetary policy for try to control price escalation, including the rate hike.

The benchmark interest rate corresponds to the yield on Liquidity Letters (Leliq), i.e. the debt issued by the BCRA to withdraw pesos from the street.

As he could know TN, the Centrale will analyze this possibility after knowing the inflation figure for November and within the framework of what it assesses as a “”change in the rate of devaluation “. The objective is to tend to the “harmonization of tariffs”.

Rising interest rates as a tool to contain inflation

Although only banks can invest in Leliq, its rate works as a reference for other instruments, such as Fixed deadlines. Thus, an improvement in this return increases the attractiveness of these investments and discouraged the use of weights for buy goods, services or dollars. But it also makes financing more expensive, especially for productive investments.

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At the market, the rate at 38% is negative, because it is lower than inflation, that is, the performance of a fixed term is lower than the increase in the cost of living. But the Treasury gives the margin increase bond yields that it places to capture weights in this manner. In this way, the Centrale liquefies its stock of debt, avoids paying an increasing interest charge and reduce treasure aid.

The market exerts a pressure around 50%, but it is excluded that these are the figures defined by the monetary authority. The path would be a gradual change, small, to evaluate the behavior of the variables which depend on it and minimize the impact in the productive sector.

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