The debate behind the interest rate, the leliq ball and the trillion pesos that the Central Bank must issue every month

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The government wants to encourage savers, large, medium, small, to avoid buying dollars. And choose instead to renew fixed-term deposits, when the only thing that is talked about is the price of the dollar in all its variations. The demand rate against the dollar It’s a recurring theme of the last 60 years – a break was taken during the ten years of convertibility – to say the least.

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A career that in recent times has adopted, for the most sophisticated, the name of “interest rate financial speculation”. Basically it’s the same thing: investing in pesos is a bet that this investment will end up making more than what is left in dollars.

This option is not available to everyone. There are companies that almost are forced to lose weightIt will be due to the nature of their business, or because if they buy a dollar, the Central Bank gives them a red card, preventing them from appearing in the official foreign exchange market.

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The concrete thing is that on Monday the Central Bank raised the bar to 97% of the nominal annual rate. Those who invest their pesos for a fixed term will receive a monthly salary of just over 8%. Sounds like a lot, but that rate may not be enough to beat inflation over the next 30 days.

That is, it is not clear that it is a “positive real interest rate”, as the saver claims and as the International Monetary Fund also requests.

Naturally, the cost of this rate increasesIt is assumed totally and exclusively by the Central Bank. It happens that the bank that takes the fixed-term deposit from its customer immediately uses those pesos to buy Liquidity Bills from the Central Bank, which yield the same rate.

Due to the repetition of this pattern, and the need to sterilize the pesos which, if released, would cause major problems on the inflationary front, The Central Bank issued $10.96 billion of Leliq and $2.77 billion of active passes. All bank pesos immobilized but remunerated. By taking those deposits, the Central Bank must disburse 1.11 trillion pesos within a month. Which it will absorb again, making the so-called “ball of leliq” grow.

For Martin Polo, Cohen’s stock economist, this mountain of central interest-bearing liabilities is nothing but more issuance and future inflation. But the urgency leads us to consider that it is a lesser evil.

The Economist Gabriel Camano (Ledesma and Associates) he relativized the severity of the rate hike and its impact on central bank debt. This is how he explained the phenomenon.

1. “If interest is compounded, it isn’t realized. Monetarily expansive is what gets realized in the balance of the BCRA, not what gets accrued.”

2) “The rate continues to lose against inflation, it ran and ran after it. Ergo, to explain the real increase in the stock of remunerated liabilities relative to GDP – not relative to the monetary base because the effective reserve requirements decrease and this affects on the monetary base – it is useless to look at the rate, if not at the exogenous emission sources.”

3) “Lowering the rate, to lower the endogenous issue associated with the stock of remunerated liabilities, far from improving anything, gets worse, because it breaks the coherence of short-term exchange rates and is equivalent to lowering the rate on deposits, which favors all or part of that stock of remunerated liabilities is realized today”.

4)” In light of the above, exogenous sources of expansion are the key to explaining the dynamics of nominality and the real stock of remunerated liabilities. Not the nominal rate that runs after inflation. Especially if we take into account its greatness. What has been said is more than convincing.”

Synthesizing. For the umpteenth time, don’t die of nominality. There is an elephant in the room, it is exogenous monetary expansion intended to finance the National Treasury. The dynamics of nominality and the real stock of remunerated liabilities are its daughters. As usual.

The rate thus used doesn’t make any sense as an anti-inflation measure, but from there to putting all the attention on the rate, giving it a role when it fails to be positive, it’s not done and there’s an exogenous emissions truck next to it it does not make sense. Moreover, half a film is missing, as happens with the demand for pesos in that sea of ​​monetary expansion to finance the needs of the Treasury. Yeah, from the ASPO exit to here, it’s done nothing but crash. That was expected.”

Source: Clarin

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