La monetary politics It 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
- Current situations
- 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.
El full report It gives us a summary of the most important monetary variables, the main points are the following:
INTERNATIONAL RESERVATIONS
These are funds in dollars or other foreign currencies that the country has, which come from exports or loans and are controlled by the Central Bank. They can include public funds, such as those from loans, and private funds, such as those that savers have deposited in the banking system.
Situation as of October 31, 2024
Reserves maintained a slight growth during the month of October, approaching the level of 30.000 billion dollars. The predetermined rate of devaluation of 2% per month, known as crawling peg, compared to inflation, causes the exchange rate to appreciate in real terms.
Related to this devaluation rate, 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 commercial transactions are carried out.
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 October 31, 2024
Over the past year, there has been a slight growth in international reserves and a downward consolidation of operations through temporary repurchase agreements or advances.
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 or coins in circulation (monetary base).
Situation as of October 31, 2024
It is evident that the mid-year goal of ending endogenous issuance and maintaining a constant level of the monetary base is being met.
The fall in securities issued by the BCRA, combined with the fall in obligations from the repo market, managed to keep the total liabilities at an almost constant level during the second half of 2024.
IN SUMMARY: The report shows the composition of the BCRA's assets and liabilities and how both evolve over time with the aim of achieving the entity's cleanup, an objective that would be achieved.
MONEY LAUNDERING
It is a measure of the current government that seeks to regularize goods and assets that are not declared through the payment of a penalty (special regularization tax).
Let us remember that, according to the regulations approved by the national congress, there are progressive scales of rates, the creation of a minimum taxable amount and fiscal stability for those who decide to pay the Personal Property Tax in advance.
The first stage ended last Friday, November 8 (there are two more stages left). The level of regularization, so far, has been classified as successful according to the current government.
REFERENCE INTEREST RATES, INFLATION 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 October 31, 2024
The level of reference rates shows a downward trend, as does the gap between the different quotes. It is important to note that the real interest rate was positive in October 2024 after one year.
