The Central Bank’s liabilities have been a longstanding issue for the Argentine economy. To address this, the Economy Minister recently announced an end to the era of negative real interest rates that had been implemented to advance their liquefaction. This shift signals a change in strategy away from the need for negative rates to achieve this goal.
Previously, the government had relied heavily on Leliq and Lecaps to reduce its liabilities by transferring them to Treasury debt. While Lecaps now offer a monthly interest rate of 4.25%, which is intended to combat inflation, it does not align with the increase in the cost of living. Banks have benefitted from this policy, particularly those that raise funds at zero rates in current accounts. However, savers in pesos, such as retirees and employees, have faced challenges due to the government’s efforts to decrease liabilities.
The decision by Economy Minister Luis Caputo to end negative real rates may indicate that the monetary policy reference rate had been lowered too drastically. The current goal is to establish an interest rate scheme of 4% monthly, aligned with an inflation rate of 4/6%. Additionally, the government hopes to stimulate liquidation of dollars held back from agricultural exports. Despite calls for stability, some uncertainties remain regarding the government’s monetary policies. Changes to the blend dollar and potential reductions in Country tax rates may impact the overall economic landscape. Ultimately, it will be key for the government’s commitment to negotiations with the Monetary Fund and efforts to stabilize exchange rates that will play a crucial role in navigating economic challenges ahead.