The strong rises of interest rates for fixed terms carried out by the Central Bank weeks ago, seems not to be enough to reach the high levels of inflation that various analysts are projecting. So it slips that it is necessary to offer a higher return to be able to beat the prices of the economy and seduce savers.
Even in the world of personal investments what many investors consider is whether the rate offered by fixed terms beats inflation; Or, if it is more convenient to carry out a placement adjusted for the prices of the economy or, directly, if the best option is to buy dollars.
Among the different possibilities that arise for savers in this scenario, it should be taken into account that the inflation forecast for all of 2022 by the analysts who participate in the Survey of Market Expectations (REM) prepared by the Central Bank, is 90.2%.
A figure that increases to 94.7% for the entire yearif only the 10 experts who best forecast that variable for the short term are taken into account. In other words, this percentage represents an increase in the estimates of 15.4 percentage points (pp) more than the survey carried out two months ago.
That is, they are projected parameters for the prices that exceed the current annual nominal rate (TNA) of 69.5% paid by traditional fixed terms, despite the fact that they rose 16.5 percentage points from the end of July to the present.
And in the case of making a bank placement for a whole year, Through the renewal every 30 days of the amount deposited with the interest obtained, it will be possible to obtain in those 12 months a effective annual rate (TEA) of 96.52%. A figure that could “fight” the inflation predicted by some experts there, but that it would continue to lose against the estimates of other analysts.
The interest rate offered today by a traditional fixed term is below inflation forecasts.
Fixed term in sight due to rising inflation
In this connection, it is key for savers to know what inflation will be in the coming months to know if the current rate of fixed terms can be an investment opportunity, or if it is delayed even more.
“For the next 12 months, inflation would be almost 84%, although currently market expectations are already at almost 100% annually. This is based on a set of assumptions such as that the agreement with the IMF can be fulfilled, where Argentina would approve the quarterly reviews, especially with regard to the fiscal deficit at -2.5% of GDP”, he details to iProfesional Roberto Geretoeconomist and portfolio manager of Fundcorp.
At the same time, in this scenario proposed for the prices of the economy, the possibility of a jump in the official exchange rate. In other words, it is contemplated that the dollar will continue with its daily devaluation managed by the Central Bank.
In addition, it is considered that the rate increase “will be moderateThe Government must obtain additional sources of income (or liquidation of expenses), in order to meet the primary deficit goal of 2.5% of GDP agreed with the IMF,” Geretto says.
Fixed term: challenge for savers
In summary, a traditional retail fixed term grants 69.5% of TNA, implying an effective annual rate (TEA) of 96.58%.
“This is located in line with inflation expectations for 2022, and also with what is expected by the REM for the next 12 months. However, aside from the banking entity’s own issues, the main risk of a traditional fixed term is the dollar and inflation”synthesizes Geretto iProfessional.
The traditional fixed term today offers a nominal annual rate (TNA) of 69.5%, and its monthly rent of 5.79% is below the prices.
According to their arguments, this is because, “Traditionally, the rate of devaluation and inflation have beaten the interest rate. For this reason, in the long term, the risks of a traditional fixed term are very high, which explains why most placements are for 30 days and the comparison with respect to the dollar and inflation is month by month.”
In this sense, a natural option for savers is to carry out a Fixed-term UVA, because it offers coverage against inflation as a guarantee, although it has the particularity that the reserve funds must be for a period of more than 90 days.
Therefore, if the inflation registered for all of 2022 is 95%, it would be in line with the return measured in TEA of the traditional fixed term.
Fixed terms UVA: alternative and risks
On the side of fixed term UVAOne of the risks is that in some month inflation is lower than the rate offered by a traditional fixed term. In that case, the alternative is to turn to the pre-cancellable option, which allows you to withdraw the money before 3 months required, after completing the first 30 days of the constitution. In that case, you pay a pre-cancellation rate of 65.5%, which is lower than that offered by a traditional placement.
Meanwhile, it is considered that the The only thing it cannot be countered against is the liquidity of this instrument.since a pre-cancellable UVA fixed term requires that the capital be left immobilized for at least 90 days so that it grants UVA inflation plus 1%.
So it’s an instrument. only for investors with that time horizonGeretto advised.
To match inflation, Geretto affirms that the traditional fixed-term interest rate should rise to at least 71.33% of TNA.
Necessary balance rate for a fixed term
According to economists, The interest rate that a traditional fixed term should offer to beat the advance in prices should not be much higher than the one currently offered by this instrument.
“The traditional fixed term currently manages to compensate for the expected inflation in the short term, although in a particular month it may win or lose. However, both the dollar and inflation present some volatility and difficulty in projecting it into the future,” Geretto explains to iProfessional.
Therefore, he maintains that not only must a fixed term remunerate the inflation expectation, but also “compensate the risk which is assumed”.
“That way, Under a scenario of 95% inflation, if we add a risk premium of 5%, the fixed term rate should be at least almost a TNA of 71.33%, to obtain a TEA of approximately 100%.Geretto sentences.
That is, it should increase at least 2 percentage points from the current 69.5% of TNA that holds this financial tool.
“In summary, the dynamics of inflation ‘runs the bow’ to all the nominal variables of the economylike the dollar and rates, lacking give a little more interest to be able to grant greater incentives to save in pesos. Of course, this is not free, because a higher rate implies a greater quasi-fiscal deficit, and also an increase in rates for credit applicants”, Geretto concludes to iProfesional.-