Argentine central bank reduces reference rate for the second time in the month

Buenos Aires. The central bank of Argentina (BCRA) lowered its reference market rate (passive repos) this Thursday to 60 percent annually, from the previous 70 percent, arguing for improvements in the conditions of the domestic macroeconomy, with fiscal surplus and inflationary contraction .

“The decision is official,” said a spokesperson for the entity, a measure advanced by Reuters based on three market sources with knowledge of the operation and later ratified in the summary of financial variables of the BCRA.

“There is a fiscal anchor that helps ensure that with the rate drop, people do not run to the dollar,” noted economist María Castiglioni in statements to the press.

The new annual nominal rate (TNA) is equivalent to an annual effective rate (TEA) of 82.12 percent.

The monetary adjustment occurred prior to an important tender for Treasury bills to finance debt maturities, at a time when the country has cut off external credit and a current loan with the International Monetary Fund (IMF) for 44 billion dollars.

“The central bank’s lowering of rates serves to force banks to put money into the (Treasury) tender and thus continue reducing the ball (volume) of overnight repos (liabilities),” said a financial agent in Buenos Aires. .

This yield is the basis with which the financial system of the southern country is managed and is a mechanism to adjust liquidity between banks.

President Javier Milei assumed the presidency in December with the commitment to attack rampant inflation and level fiscal accounts, as first measures.

This is the second rate reduction this month, since on April 11 the monetary authority lowered it from 80 to 70 percent annually due to signs of less uncertainty along with the consolidation of the markets.

Thanks to a strict and unusual fiscal policy, the mood of investors in Argentina has dramatically improved with a solid recovery of BCRA reserves, although poverty levels are increasing along with a notorious recession that makes a constant inflationary fall possible.

Two commissions in Congress were working this Thursday on the so-called ‘Bases Law’ project promoted by the ruling party, which seeks to balance the country’s accounts through extensive deregulation in fiscal and labor matters.

With Milei’s mandate, the BCRA’s reference rate dropped drastically from 133 percent to one hundred percent and then a second reduction from one hundred to 80 percent.