Fixed Term Rates on the Move: Impact of President Javier Milei’s Policies on Interest Rates in Argentina

Since President Javier Milei took office in December, the Central Bank has gradually lowered the reference interest rate five times, impacting fixed term performance. The biggest change occurred in March when the minimum performance for fixed terms was eliminated, giving banks greater flexibility to set their own rates.

As a result of these changes, nominal annual rates for fixed terms range from 51% to 37%, with differences in monthly returns depending on the bank chosen. This has led to varying returns for fixed terms, making it difficult for banks to accurately reflect the change in interest rates.

In addition to the reduction in rates, interest rates have also moved into negative territory in real terms, offering returns below inflation. This is part of the Central Bank’s strategy to address liquidity surpluses and eliminate financial system controls by normalizing reserve requirements.

The goal is to shift banks’ focus to lending to families and companies at lower rates, accelerating liquidity in the face of inflation. By reducing rates and encouraging lending, the Central Bank aims to stimulate economic growth and change the economic landscape.