Squeezed by the jump in inflation in April. the Central Bank responded in mid-May with a 600 basis point hike in the fixed-term rate, which rose to 154.28% annually. Although the effective yield may sound attractive, in an economy with skyrocketing nominality, the adjustment of rates did not achieve the desired effect: in May the fixed maturities fell compared to the previous month.
The increase in interest rates, which led to the monthly return of this type of investment, the favorite of most Argentines who choose to save in pesos, to exceed 8% per month, failed to seduce savers. According to data from the Central Bank itself, last month term deposits in entities fell in real terms, that is, discounting inflation for the month, 2.5% compared to the mark they had registered in April.
The falls were recorded in retail placements, which according to a latest decision of the Central, reaches deposits for up to $ 30 million, as wholesalers. The former showed a greater contraction, with a real monthly fall of 4.5%, while the placements usually made by large companies decreased 2.1%.
Where did the pesos that came out of the banks go? A first hypothesis may be that savers sought exchange rate hedging. However, during May the blue dollar rose just 3.3%, to go from $ 474 with which it closed April post-run to $ 490, with which it ended last month. Financial dollars did rise a little more, but controlled by official intervention and the new provisions of the Securities and Exchange Commission.
The pesos that were not renewed in the stock of the fixed terms did not remain in the banks either. At a general level, deposits in pesos of the private sector fell last month 1.4% compared to what had been seen in April: in the year-on-year comparison they also show a contraction of 1.2% in real terms. In this way, they cut a positive streak that extended since December last year.
Pesos in demand accounts also fell: 7.2% reais from May 2022. Although last month's decline was lower than that recorded in April. The 1.3% decline in this stock only shows how the trend is deepening.
The pesos burn and the rate is not enough for them to stay in the banks. In the consultancy LCG they said: "It is expected that demand deposits will continue to evolve below the price level of the economy, due to an acceleration of inflation that discourages the holding of liquid money. If the fall is not greater, it is because the increasing nominality makes handling with physical money more and more cumbersome."