Las interest rates rose again in the local market amid the lack of liquidity in pesos and the growing exchange rate tension. In fact, this Wednesday, the overnight surety rate reached a maximum of 45 percent annual nominal, while the interbank REPO reached 57 percent annual nominal, reflecting the rising cost of money in the financial circuit and the increasing difficulty in obtaining funds.
The pressure was amplified by the reluctance of banks to part with liquidity in a scenario of high demand for pesos and restrictions derived from reserve requirements. System operators indicated that The shortage of funds responds to the Central Bank’s strategy of absorbing currencyin an attempt to moderate exchange tensions and control monetary expansion. The lower liquidity available translates into an increasingly higher cost of funding, which impacts lending rates and makes credit more expensive for the private sector.
In parallel, the Treasury maintains its tenders for instruments in local currency to absorb surpluses and postpone maturities, while the market carefully observes the evolution of financial dollars and devaluation expectations.
The increase in rates reflects the search for coverage in a scenario of uncertainty prior to the elections and strong competition for available pesos. In this framework, official policy aims to maintain exchange rate stability, although at the cost of more expensive financing and lower overall liquidity in the system. Even so, it is not clear that the government will be able to keep the situation afloat.
