BCRA adjusts benchmark interest rate: 78% annually

BCRA adjusts benchmark interest rate: 78% annually

It was the first monetary policy rate increase in 2023 and also since September last year

Argentina’s Central Bank (BCRA) Thursday decided to raise the benchmark interest rate by 300 basis points to 78% annually, it was announced in Buenos Aires the day after the INDEC said the Consumer Price Index for the month of February ad grew 6.6% for a year-on-year inflation of 102.5 %, the highest in the last 32 years.

It was the first monetary policy rate increase in 2023 and also since September last year.

After its usual Thursday board meeting, the BCRA decided to raise the rate from 75% to 78% nominal annual rate, which implies a yield of 6.5% per month or 113% per annum for those who renew their investments during the next 12 months.

Analysts in Buenos Aires financial circles considered that the measure was a gesture from the BCRA to the International Monetary Fund while waiting for the next US$ 5.3 billion disbursement pending approval.

The idea is that investors prefer to hold on to their pesos instead of seeking US dollars which could skyrocket the exchange rate.

In this scenario, Argentina signed a debt-refinancing deal with Switzerland as part of the Paris Club agreement. Economy Minister Sergio Massa and Swiss Ambassador Hans-Ruedi Bortis made the announcement Thursday.

“In the framework of the agreement with the Paris Club that we reached in October last year, together with the ambassador of Switzerland, Hans-Ruedi Bortis, we signed a particular agreement with that country for the refinancing of the debt that Argentina maintains with the group of countries,” Massa said through Twitter.

“These kinds of agreements help sustain the economic recovery and open new possibilities for bilateral financing of infrastructure and export promotion projects that allow us to create jobs and strengthen our reserves,” he added.

This agreement with Switzerland follows the one signed last December with the Government of Italy.