Central Bank raises interest rate for mutual funds’ repo transactions

The rate is now 68.4%, while financial and informal US dollar exchange rates keep rising.

The Central Bank raised the one-day repo rate for mutual funds on Monday, in another attempt to contain the escalation of the parallel exchange rates.

According to the Central Bank B12465 resolution, the repo rates for mutual funds will now be 95% of the repo rates for banks, which grew to 72% last Wednesday. That means that as of yesterday, the annual nominal repo rate for mutual funds is 68.4%, a 14.4% increase.

Before the decision, mutual funds got 75% of what banks got, which meant they were offered a 54% rate.

In passive repo operations, the Central Bank sells financial instruments then buys them back. As established by the central bank in July, the passive repo rate is the minimum reference rate.

As per the last monetary policy report by the Central Bank, dated January 20, the current repo stock was AR$2.17 trillion. Only AR$32 million of the repo stock was in the hands of mutual funds.

The measure goes in line with the US$1 billion debt buyback Economy Minister Sergio Massa announced last Wednesday and the 200-point rise in the interest rate.

These decisions seek to discourage investors from fleeing to the MEP dollar, which is pushing the prices of both financial and informal exchange rates.

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