In the midst of a scenario of overheating of inflation, the Central Bank announced that it will keep the interest rate paid for placements in traditional fixed term. Therefore, savers wonder if, after this measure, it is still a business to turn to this investment.
The statement from the monetary institution details that “will continue to act prudently” before the evolution of the consumer price index (CPI).
It should be remembered that last Tuesday INDEC reported that January inflation was 6%, a figure that was “dangerously” close to the rent offered by the traditional fixed term, which is around 6.2% per month to a period of 30 days for individuals, as long as the money placed is less than $10 million. That is, the nominal annual rate (TNA) of this savings instrument is 75%.
In short, for the moment one-month deposits continue to provide positive returnsand they continue to be an instrument to protect the purchasing power of income.
And from the side of fixed term UVA, which is the financial tool that adjusts for inflation, by taking the price level measured in the 45 days prior to the placement made, for the moment it does not turn out to be a seductive option. The explanation for this is that in recent times the CPI was around 5% per month, a figure that is below what the traditional option pays. Added to this is that it requires leaving the funds locked in for 90 days to receive a return that today exceeds that offered by the traditional one in just 30 days.
Is the traditional fixed term business?
The increase registered in the Inflation generates concern not only among savers, but also in the Central Bank itselfwhich alerted this Thursday that it is monitoring prices and their impact on the traditional fixed term.
“The monthly acceleration in the rate of increase of the CPI was explained almost entirely by increases in the Seasonal categories, mainly vegetables and tourism. Also in the Regulated, especially transport, gas and communication“, indicates the monetary entity.
The “counterweight” that moderated the expectations of the official body is that the core inflation, which reflects the most trend behavior of the general price level, was located at “a level similar to that of December”, with an increase of 5.4%. That is, it barely advanced 0.1 percentage points.
“In this way, the interest rates remain in positive territory in real termswhich guarantees the protection of savings in pesos and contributes to keeping exchange expectations anchored, favoring the disinflation process,” the BCRA detailed.
The analysts surveyed by iProfesional agree on this point of view, since they consider that the traditional fixed term, for the moment, continues to be a good option for savers.
About, Sebastian Menescaldi, economist and associate director of the consultancy Eco Go, opines: “For now the numbers are closed, the issue is that the risk is getting higher and the chances of losing against inflation are more likely. But for now, it’s still business at current rates.”
While, Javier DicristoInvestment Manager at Banco Meridian, adds that “The saver would only be covered by inflation. For this reason, as long as the Central Bank maintains the current rate of devaluation, below 6%, everything will be calm. But as soon as the dollar or inflation accelerate, the traditional fixed term will automatically cease to be a “business”.
By this situation, Paul RepettoHead of Research at Aurum, warns: “The situation is uncertain enough, so the risks that inflation exceeds the rate are not negligible. Above all, if the small saver has a structure in which the largest expenses in his consumption basket are associated with prices that run well above inflation.”
Fixed term: is it convenient or not for the saver?
So far, for the savers it is convenient to turn to the traditional fixed term, but they should closely monitor the behavior of the economy’s prices. Above all, the announced tariff adjustments and what will happen to the price of meat, a food that has an incidence of 8% in the CPI measurement.
From the side of the inflation projections of the latest Survey of Market Expectations (REM), carried out by the Central Bank by surveying some 40 economists, the projections are that the consumer price index (CPI) could be located around the 5.5% in February and 6% in March.
Some estimates that generate doubts, because the REM itself for February had projected inflation of 5.6% for January, a figure that days later the official INDEC measurement “corrected” to 6%. Thus, This upward trend may be observed in the coming months, with the risk of exceeding the 6.2% per month currently paid by the traditional fixed term.
In this regard, and to bring some peace of mind to the saver, the The Central Bank reported this Thursday that “it will continue to monitor the evolution of the general level of prices and the dynamics of the exchange market for the purposes of calibrating its interest rate policy and liquidity management”.
From the perspective of the small investor, the gaze will also be on the behavior of the price of the dollar, which is the great “reference” for the protection of the income of Argentines.
“The issue here is what the investor needs and what he expects to happen. For example, if you are looking to become a dollar, today the official devaluation is at rates of less than 6%, so I can do a carry trade with traditional fixed terms, which pay more. But if you cannot access the official market and you must go to the stock dollar (MEP) or the blue, that is another story because it can go well or badly, depending on what happens that month”, introduces iProfessional Andres Salinaseconomist, teacher and researcher at the University of La Matanza (Buenos Aires).
On the other hand, it completes that being inside a traditional fixed term “means not being able to move our money for 30 days, and in Argentina it is a long time. A possible devaluation can complicate the panorama for us. I really don’t think that’s going to happen before the election, at least not the Primary. Therefore, today the traditional fixed term gives us a return above the official devaluation, but not so above inflation”.
In summary, if the gaze is set on the long term and the saver thinks about the effective annual rate (EAR) who can win, which is 107% in 12 monthsby consecutively renewing the initial capital plus the interest earned every 30 days in a fixed term, will win when compared to the latest inflation forecasts for all of 2023 from FocusEconomics, which is 97%.
In other words, if a fixed term is renewed for one year, the equivalent of one theoretical rent of 8.92% monthlywhich is much higher than inflation estimates of 6% per month.-
