The Board of Directors of the Central Bank of the Argentine Republic (BCRA) announced today the implementation of a set of measures aimed at reconfiguring the instruments of monetary policy, among which stands out an increase of 2 percentage points in the interest rate of the Liquidity Letters (Leliq), from 38% to 40% per year.
In addition, in line with the rise in the monetary policy interest rate, in order to promote its full transmission to the return of term placements in pesos, the BCRA Board of Directors raised the minimum limits of interest rates on the terms fixed.
For human persons, the new floor thus becomes 39% per year for 30-day deposits, while for the rest of the depositors of the financial system the minimum guaranteed rate will be 37% per year.
In a press release, the body led by Miguel Pesce said that the measures aim to “continue accompanying the path of recovery and reinforce the conditions of monetary, exchange and financial stability.”
“These decisions seek a reordering of the interest rate scheme and a simplification of the organization of systemic liquidity,” said the monetary entity.
In this framework, it established, in the first place, an increase of 2 percentage points in the interest rate of the Leliq for a 28-day term, going from 38% to 40% per year.
It was also decided to expand the maximum limit for holding Liquidity Letters to a 28-day term by up to an amount proportional to the stock of time deposits of the private sector of each financial entity.
At the same time, the monetary authority made progress in creating a new 180-day Leliq, whose rate is set at 44% per year.
The auctions will be held twice a week in the case of the 28-day Leliq, and once a week for the 180-day term.
“These modifications will contribute to starting a process of migration from sterilization to longer maturity periods, as well as to extend the BCRA reference rate curve,” the statement said.
With regard to shorter-term instruments, passive repos for 7 days will be progressively eliminated, while those arranged for 1 day will continue to be in force.
The 28-day Leliq rate will continue to be the benchmark indicator regarding the monetary policy orientation, which will be complemented by the BCRA’s participation in the secondary market for public securities in order to align the temporary rate structure and guarantee the liquidity of these instruments.
In line with the rise in the monetary policy interest rate, in order to promote its full transmission to the return of term placements in pesos, the BCRA’s Board of Directors also raised the minimum limits of interest rates on fixed terms .
For human persons, the new floor is set at 39% per year for 30-day deposits, while for the rest of the depositors in the financial system, the minimum guaranteed rate is set at 37% per year.
“The new level of the monetary policy interest rate is in line with the objectives and plans of the BCRA for the year 2022, in which the authorities established the goal of setting the path of the policy interest rate in order to tend towards returns positive reals on investments in local currency, and to preserve monetary and exchange stability “, he said.
Finally, the Central Bank pointed out that “throughout 2022, the factors that put pressure on the general price level are expected to subside” and expressed its conviction that “the exchange and interest rate policy, together with an administration prudent of liquidity, will contribute to improve exchange expectations ”.