The Central Bank (BCRA) evaluates raise the interest rate benchmark, one of the typical monetary tools to contain inflation. Despite the incessant rise in prices, it is fixed at 38% for more than a year, but it will finally be modified in line with the countries of the region.
Up to now, Martin Guzman was reluctant to make changes in the interest rate, understanding that the difference between his inflation target of 29% for this year and the current record -45.4% in the accumulated of the first eleven months, as reported this Tuesday by Indec, is a consequence of the international rise in prices. However, it should have an impact on other countries, but they do not register increases similar to those of Argentina.
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Despite not being anywhere near the INDEC records, most of the central banks of the region is taking concrete measures of monetary policy for try to control the escalation of prices, including the rate hike.
The reference interest rate corresponds to the yield of the Liquidity Letters (Leliq), that is, the debt issued by the BCRA to withdraw pesos from the street.
As he could know TN, the Central will analyze this possibility after knowing the inflation figure for November and within the framework of what they assess as a “change of devaluation rhythm “. The objective is to tend to the “rate harmonization”.
The rise in interest rates as a tool to contain inflation
Although only banks can invest in Leliq, its rate functions as a reference for other instruments, such as Fixed deadlines. Thus, an improvement in that return increases the attractiveness of those investments and discourages the use of weights to buy goods, services or dollars. But it also makes financing more expensive, especially for productive investments.
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To the market, the rate at 38% is negative, because it is below inflation, that is to say that the performance of a fixed term is lower than the rise in the cost of living. But the Treasury gives margin to raise bond yields that it places to capture weights in this way. In this way, the Central liquefies its stock of debt, avoids paying a growing interest burden and reduces assistance to the treasury.
The market is putting pressure on it to be around 50%, but it is ruled out that these are the numbers defined by the monetary authority. The path would be one gradual modification, small, to evaluate the behavior of the variables that depend on it and minimize impact in the productive sector.