There was a sharp drop in fixed-term deposits in January, reported the Central Bank

Traditional fixed-term deposits fell 22.3% in real terms in January, which showed the decision of savers to withdraw their money from banks because the interest rate paid was well below inflation.

This was revealed by the monthly Bank Report published by the Central Bank of the Argentine Republic (BCRA).

The savers’ decision is a result of the fact that during January the banks paid an interest rate close to 9%, while inflation was 20%. The national government then ordered the liberalization of the system and the elimination of the minimum rate.

Faced with the obvious loss of purchasing power, the owners of the fixed-term loans decided to withdraw their deposits and divert them towards other investments.

One of these refuge tools were the UVA fixed terms, which guarantee a return equal to inflation plus a slight interest.

According to the BCRA report, they increased 27.3% in real terms during the period (discounting inflation), reported the Noticias Argentinas agency.

The UVA fixed term had a minimum term of 90 days, but in light of this migration the Central Bank extended it to 180 days. The measure was at the request of the banks, which argued that they did not have the financial tools to respond to the returns offered by UVA fixed terms. In more than one meeting they even asked that they be eliminated.

This process of interest rates below inflation is what causes the “liquefaction” of savings of individuals and families, who thus suffer at the end of each month from the loss of purchasing power of their savings.