Argentines are turning to short-term deposits in the face of inflation and devaluation fears.
The percentage of money in two-month peso instruments increased to 82 percent on February 1, compared to 73 percent in January 2020 and 6 percent in the same month of 2019, according to Central Bank data. On the other hand, deposits linked to inflation increased 81 percent during the last year.
Concerns about inflation have increased after consumer prices rose four percent between November and December, the biggest monthly increase in just over a year. Speculation about a potential devaluation as foreign exchange reserves decline, which would raise import costs, is leading a growing number of Argentines to withdraw their money from longer-term peso deposits.
"People seek to cover themselves against inflation and replace long-term deposits with other alternatives, such as deposits that are adjusted for inflation or short-term bonds that are adjusted for CPI," said Roberto Geretto, an economist at Banco CMF, in an interview.
The Central Bank requires banks to pay a minimum rate of 37 percent for fixed-term deposits of less than one million pesos and 34 percent for larger amounts. But with inflation threatening to accelerate, that's not enough to convince savers to pin their money for more than a few months.
"If inflation continues at four percent, it is logical that this trend will continue," said Geretto.
by Ignacio Olivera Doll, Bloomberg