The jump in devaluation at the beginning of the Milei era, added to the lowering of rates faced by the tandem Luis Caputo and Santiago Bausuli, had its impact on the stock of fixed terms. Last month, pesos deposited in banks fell 25% above accumulated inflation compared to what was recorded in November.
The “blender” effect. This is even more impactful if we compare the stock of term deposits at banks at the end of last year with that observed twelve months ago: term deposits at banks decreased in real terms by 45% in one year. The 54% devaluation of the exchange rate and the surge in inflation, which is expected to close at around 30% in Decemberplacements in banks are discouraged.
But the most determining factor was undoubtedly the sharp drop in rates operated by the Central Bank in the second half of the month. The organization has decided to reduce fixed-term rates by 20% or 23 percentage points. Therefore, starting Tuesday, a one-month deposit at a bank will offer a minimum rate of 9.1% monthly. A loss of more than 20% compared to the advancement of the rest of the economy’s prices.
Savers responded cautiously: many have chosen not to renew fixed terms last month after the placement expired. Consultancy firm LCG said: “Fixed terms continue to be in place a low renewal rate compared to the average of the last three years. The rate is currently 86%, 16 percentage points lower than average. “It is also 6 percentage points lower than the November renewal rate.”
Almost in parallel with the reduction in yields of traditional forward terms, the Central Bank also issued a statement against UVA forward placements. First, under pressure from the banks, it agreed to eliminate the “floor rate” of the 30-day “pre-cancellable” options from this instrument which had a duration of 90 days.
Banks reacted promptly with a strong adjustment: the “pre-cancellation” rates of fixed maturities linked to inflation have fallen from the 120% annual rate recorded in mid-December to 20% which is held these days in some banks.
Subsequently the Central gave “the final blow” to the terms set by UVA and in the last round of the month it extended the placement times to 180 days.
In City I agree Negative real interest rates at such a high level against inflation are “not sustainable”. “This deeply negative interest rate environment cannot persist for long as it conspires against declining long-term inflation. It is useful as a “consolidation” measure for the BCRA in the short term, but does not constitute an IMF-recommended monetary policy in more “normal” times, they wrote on Delphos.
Going forward there are no great expectations for change on this front. According to a calculation carried out by the IEB Group, if we take into account the 199% annual effective rate derived from 30-day bank deposits and the inflation estimated at 30% for last December, the annual effective rate in real terms reached a December the minimum amount of -87%.
If for the next few months inflation remained at 25% in January and 18% next month, as expected in the City, the annualized effective rate would remain at negative levels of -79% and -59%, the IEB Group estimates.
Source: Clarin
