How much does the fixed term pay: banks cut their rates by up to 40 points

A cash truck passes through the financial center of Buenos Aires, Argentina (Reuters)

Commercial banks cut the rate they pay for fixed-term deposits by up to 40 points. The movement comes hours after the Central Bank decided to lower the reference rate and eliminate the floor that forced payment for traditional retail deposits.

The first to move were Banco Santander and Banco Patagonia. They stood out for the speed with which their mobile apps reported new performance. Santander pays, starting today, 70% nominal annual rate. The Patagonia offers a nominal 71% annual rate. Until yesterday, like all of them, these two entities paid 110% annual nominal for this type of placements.

Another bank that updated the returns it offers this morning is Banco Ciudad. It went from the mandatory threshold of 110% that was in effect until yesterday to now paying 75% annual nominal value. BBVA Argentina, for its part, also cut the yield of the traditional fixed term to 75% nominal annual.

Spokespeople for Banco Galicia, for their part, said that they are adapting their systems to take 30-day deposits at a nominal annual rate of 70%. At Banco Nación and Banco Provincia they told this medium that they will take it to 75% starting this Tuesday. Same level to which Banco Hipotecario adjusted its performance, as can be seen in its home banking.

The rest of the entities will apply their own cuts in the next few hours.

Infobae developed a simulator to estimate the new performance. It allows each user to enter the amount they wish to invest and, in addition, the rate offered by their bank. Thus, for example, it shows that those who offer a nominal annual rate of 70%, which implies a direct return of 5.75% monthly, pay for a fixed term of $100,000 placed today $105,753.42 within 30 days, that is, the initial capital plus $5,753.42 of interest.

Until yesterday, Monday, fixed terms had to pay at least 110% nominal annual amount, meaning that the same investment of $100,000 yielded $9,041.10 in interest in 30 days.

The Central Bank decided last night to modify the monetary policy rate: starting tomorrow, March 12, the monetary policy interest rate, corresponding to passive repos, is set at 80% of the annual nominal rate (TNA).

According to Federico Furiase, advisor to the Minister of Economy Luis Caputo, “this implies a reduction in the monthly effective rate of repos from 8.6% monthly effective rate (TEM) to 6.8%.”

The entity also reported that the interest rate on fixed terms became free. Each entity will decide how much to pay according to its needs to add or subtract deposits.

“In response to the evolution of the economic situation and financial liquidity conditions, the BCRA authorities have determined the following measures,” the monetary authority said in a statement. And he detailed these three measures:

• “Reduction of the monetary policy rate: as of March 12, the interest rate on passive repos is set at 80% TNA”, in relation to the change already mentioned.
• “Deregulation of minimum interest rates: as of March 12, the minimum fixed-term rate is eliminated.” In other words, starting tomorrow banks will be able to offer the performance they deem appropriate, something that is expected to bring more competition between entities.
• “Normalization of liquidity management through repos: as of March 18, access to the repos window will once again be exclusive for financial entities regulated by the BCRA”, so funds will no longer be able to use that tool. investment commons, only banks will do it.

Among the reasons that explain the decision, the Central said that “since December 10, 2023, the economic situation presents visible signs of reduction in macroeconomic uncertainty.”

In this context, he mentioned the downward trajectory of retail inflation, the favorable outlook for underlying inflation, the moderation, in real terms, of monetary issuance and the consequent improvement of the BCRA’s balance sheet, the sustained accumulation of international reserves, the stability of the exchange gap, and the favorable evolution of the accelerated access program for MSMEs to the free exchange market.

Regarding inflation, the entity chaired by Santiago Bausili said that “after the launch of the initial adjustment of relative prices in December 2023, a pronounced slowdown in inflation is observed, despite the strong statistical drag that inflation carries in its monthly averages. More frequent price surveys have been useful to appreciate end-to-end monthly dynamics. They will continue, therefore, to offer a complementary tool in the diagnosis of the trajectory of inflation.”

In addition, it was argued that this downward trajectory that the Central sees for retail inflation also represents a decrease in the exchange rate pass-through in relation to previous experiences and a trajectory lower than that of the projections implicit in the agreed memorandum of economic and financial policies. with the International Monetary Fund (IMF). Thus, it was highlighted that in the coming months the BCRA authorities “will focus on the evolution of core inflation, in view of the announced adjustments to regulated rates for public services.”