La monetary politics is the set of decisions and measures taken by the monetary authority of a country to influence the cost and availability of money in the economy. Our report examines monetary policy in Argentina and includes:
- The foundations and goals of monetary policy
- Evolution of international reserves
- Evolution of the BCRA's Assets and Liabilities
- Analysis of interest rates, inflation and exchange rates
- The future macroeconomic forecast
Monetary outlook over the past year
Since December 2023, with the assumption of power by the new authorities, a “non-disruptive monetary regime change” (as the Central Bank itself called it) was launched, in order to correct the current imbalances.
The monetary authority focused on endogenous issuance instruments, that is, instruments that are part of the BCRA's liabilities and that accrue interest.
First, on December 18, the LELIQs were transformed into passive one-day "pases", then on July 22, 2024, the suspension of the operation of passive passes was ordered and the "Letra Fiscal de Liquidez" (LeFi) was established as the main liquidity management instrument of the banking system.
The report accompanying this note provides a summary of the most important monetary variables….
INTERNATIONAL RESERVATIONS
These are funds in dollars or other foreign currencies held by the country. They come from exports or loans received by the country and are controlled by the Central Bank. They may include public funds, such as those from loans, and private funds, such as those deposited by savers in the banking system.
Situation as of February 28, 2025
The goal of strengthening international reserves has not yet been met, largely due to the real-world lag in the exchange rate, which fell by 192 million in February.
The predetermined devaluation rate of 2% per month during 2024, known as the crawling peg, compared to inflation, causes the exchange rate to appreciate in real terms. Starting February 1, 2025, this rate will drop to 1% per month.
Related to this rate of devaluation, the report included the evolution of the daily Multilateral Real Exchange Rate Index of the Central Bank of the Argentine Republic (ITCRM), which measures the relative price of goods and services in our economy with respect to those of a group of countries with which we conduct commercial transactions.
BCRA ASSETS
Assets are the goods and rights that the bank has over the rest of the world. The assets of a Central Bank include the following items: gold and foreign currency, credits (to banks and the public sector), securities portfolio and finally its own real estate or furniture.
Situation as of February 28, 2025
Following the April and July restructuring resulting from an adjustment in the valuation criteria, at the amortization cost of the National Treasury's Non-Transferable Bonds, the aggregate asset level shows an increase due to Public Securities.
BCRA LIABILITIES
These are the debts that the bank has contracted and therefore include the reserves that private banks have deposited, the deposits made by public administrations and the banknotes and coins in circulation.
Situation as of February 28, 2025
The BCRA decided to close the passive repurchase window starting July 22, 2024, with the goal of ending the endogenous issuance generated by these repurchases. During February 2025, the monthly percentage change was 1,25%, with a cumulative annual rate of 1,6%.
IN CONCLUSION: Regarding the situation of the assets and liabilities of the BCRA, the report shows how the composition of both is evolving with the aim of achieving the clean-up of the entity, an objective that would be achieved.
REFERENCE INTEREST RATES, INFLATION, ITCRM and EXCHANGE RATE
The monetary policy rate indicates the policy bias adopted by the monetary authority to achieve its inflation targets. The report is also complemented by inflation data and the main exchange rates (official, MEP, CCL, blue, card).
Situation as of February 28, 2025
The nominal annual monetary policy rate as of February 28, 2025, was 29%, while the real interest rate was zero, as in December 2024.
