After the inflation data, the Central Bank lowered the interest rate by another 10 points and set it at 40%.

Encouraged by April inflation data, the Central Bank decided today to cut its benchmark interest rate by 10 percentage points. Thus, starting tomorrow, the annual nominal rate will be 40%, which is equivalent to an effective rate of 49.15%.

The BCRA figure came shortly after Indec reported that the consumer price index (CPI) for April was 8.8%, below expectations, while many consulting firms began publishing estimates for the May index, placing it between 5 and 6 percent. .

This is the fifth interest rate cut by the BCRA in almost two months. On March 12, it was reduced from 100% to 80%; April 10 – from 80% to 70%; April 25 – from 70% to 60%; A week later, on May 2, it deepened the decline from 60% to 50%, and today made another aggressive decline.

With this new decline, investors will again see another drop in profitability of fixed-term and remunerative accounts. There are currently 25 banks that report their time deposit rates to the BCRA Their average nominal annual rate ranges from 34 to 41%. At a base rate of 40%, these yields would fall again by about 10 percentage points.

To chart the payout of retail deposits, it can be noted that Banco Nación’s 30-day fixed term for $100,000 was earning a rate of 40%, meaning that at maturity it would pay out $103,287.67, i.e. 3 $287.67. interest or monthly interest of 3.29 percent. A reduction in this rate by ten points will mean that the yield on the same deposit will fall by approximately 2.5%. Thus, $100,000 per month will yield 2,500 pesos.

But beyond the fate of depositors, it is clear that the tandem of BCRA and the Ministry of Economy is prioritizing other goals. Offering investors a positive real rate is not on the agenda: the main thing is to reduce the remunerated obligations of the Central Bank, thereby reducing emissions and its inflationary effect.

The Minister of Economy himself, Louis Caputo, explained this a few hours ago on his social network account with additional rewarded obligations, and to top it all off, everyone will be talking about the “carry trade” … “

Caputo’s message came in response to praise from an economist who explained that by choosing to keep interest rates low and in negative territory amid inflation, the government “will force us to save an amount equivalent to three monetary basis interest that we would otherwise pay banks. Only in 2024.”

On the other hand, the reduction in rates also indicates the intensification of lending, which, in a recessionary scenario, does not complete its growth. In addition to the announcements of UVA mortgage rebates (ten banks are already offering them), the government expects the cost of financing for companies and consumption to fall. For this reason, they are seeking to ensure that the base rate reduction is immediately passed on to all credit lines.

News in development