The end of an era in economic policy has been announced by Economy Minister Luis Caputo. He stated that the promotion of negative interest rates was no longer necessary to advance the liquefaction of liabilities of the Central Bank (BCRA). This marked a shift in monetary policy towards stability and growth.
Previously, the dominant idea in economic policy was focused on meeting President’s objective to end BCRA liabilities. This involved transferring BCRA liabilities to Treasury debt, which was considered a risky move. However, this strategy led to challenges for savers who saved in pesos as traditional fixed terms were considerably lower than Lecaps, short-term bonds that paid banks 4.25% monthly, introduced as an alternative to negative rates.
Caputo emphasized that this rate was no longer negative in the face of inflation. While Lecaps offered a 4.25% return, traditional fixed terms of savers were significantly lower. This decision signifies a shift in monetary policy from promoting negative rates to focusing on maintaining stable interest rates while considering factors such as inflation and agricultural exports.
The government’s decision not to devalue the currency and maintain the blend dollar system could provide stability in the exchange market. Furthermore, they are also considering negotiating an agreement with the Monetary Fund to address economic challenges. Overall, these announcements signal a recognition that lowering monetary policy reference rate had unintended consequences such as an increase in exchange gap and a shift towards stability and growth for future implications.
In conclusion, Caputo’s announcement marked a significant milestone in economic policy as it signaled a shift towards stability and growth rather than continuing with risky strategies aimed at promoting negative interest rates or devaluing currency. The future implications of these decisions will depend on how they are implemented and their impact on different sectors of the economy.
