The Central Bank recently lowered the interest rate, resulting in a debt liquidation party for savers. This decision, made by President Santiago Bausili, marked the fourth reduction in the reference interest rate during Luis Caputo’s tenure as minister. The rate now stands at 50% annually, equivalent to 4.2% monthly. The reduction was initially attributed to a decrease in the cost of living, with the government aiming for further drops in the coming months.
One perspective suggests that the Central Bank’s move is aimed at “liquefying” the Central debt, as advocated by President Javier Milei. This strategy is seen as essential to raising the exchange rate, given current limitations on accessing dollars at official prices. The strength of dollar stocks plays a significant role in mitigating the impact of interest rate reductions on free dollars, particularly due to the presence of the blend dollar system.
As a result of the rate cut, interest rates on fixed-term deposits have fallen to around 37-40% annually. This rate is below any inflation forecasts for the near future. By reducing debt payments associated with its monetary liabilities, the Central Bank aims to finance this through savers in pesos. However, with limited access to adjustable deposits, savers may find themselves losing in real terms.
On the other hand, negotiations are underway with China to address a looming debt repayment of US$5 billion in June. This amount is part of a swap agreement dating back to the time of former Minister Sergio Massa. While government officials have expressed their intentions to honor the payment, there is uncertainty surrounding the specifics of the swap agreement.
In conclusion, the Central Bank’s decision to lower the interest rate has implications for both savers and the country’s debt management. With ongoing negotiations and uncertainties surrounding debt repayments, the financial landscape remains uncertain in the coming months.