Waiting for the inflation data, what will the Central Bank do with the rates?

Waiting for the inflation data, what will the Central Bank do with the rates?

This week the data for the Consumer Price Index of the City of Buenos Aires (IPCBA) for May was released, which stood at 7.5%, below the result of the previous month, when it was 7.8%. and that suggests that the national inflation data could be a little better than expected by private analysts, which is between 8% and 9%. In this scenario, one of the questions that analysts at City are asking is What will the Central Bank (BCRA) do this month with the traditional fixed term rate?

He Wednesday June 14, the National Institute of Statistics and Censuses (INDEC) will announce the national CPI for May and, as pointed out to Ámbito by the economist from the University of Avellaneda Pablo Ferrari, “private consultants do not estimate that it will be much higher than that of April, so, if so, due to the rate hike logic that the BCRA has been using, it should not rise”.

Conversely, meanwhile, for Joel Lupieri, an economist at Elypsis, “it is likely that, given the price dynamics that has been imposed, the BCRA continues with the trend of continuing to adjust rates upwards”. In his opinion, it is important that, in moments of uncertainty, the monetary authority continue with a firmly restrictive policy to move forward in the search to appease both the expectations of depreciation of the peso and the inflationary escalation.

An uncertain scenario: does inflation slow down?

The existence of these two opposing gazes is very common at this time in the City. And it is that, as indicated by the economist and director of Eco Go Sebastián Menescaldi, “this month, it is a little more uncertain to know what the BCRA is going to do”.

Because? It happens that, with the rates because the private consultancies gave inflation for May in the tone of 9%, but the inflation data in CABA was lower than last month, and Menescaldi warns that “this opens the door to, if it is located at levels below the expectation, it would not be necessary to touch the yields of the fixed term”.

Let us remember that, after the inflation data of 8.4% registered in April, the Central raised the rate by 600 basic points and brought it to 97% (Annual Nominal Rate, TNA) for the traditional fixed terms of 30 days per month. up to $30 million, which began to have an effective annual yield (TEA) of 154.3% and an effective monthly rate of 8%.

Fixed term: what will the BCRA do?

So, if inflation for May begins with 7, that is to say that it is located, as many expect, between 7.5% and 8%, the monthly yield of the fixed term would become real positive with respect to the price evolution data, as required by the International Monetary Fund (IMF) and as the market has been constantly demanding from the BCRA.

Until now, the high inflationary indices have been causing the monetary regulator to have to run from behind to inflation even though it has been adjusting the rate strongly in recent times and giving strong signals to the market regarding its determination that the fixed term rates are positive.

However, there are still a few days left for the CPI data to be known, which will be published next week. In principle, Menescaldi considers that “it is feasible that it will give levels similar to those of April”, although the Government expects it to be below. And, in that case, he considers that the Central will not have to increase the rate.

Other variables that affect rates

On the other hand, he mentions that it is important to also take into account the parallel exchange rate dynamics (remember that the main reason for the penultimate rise in the fixed term rate was a currency run that occurred at the end of April). “A good piece of information in this sense is that, this month, the blue dollar is calm for the moment,” Menescaldi highlights in this regard. Although he warns that the BCRA He has been selling reserves after the end of the soybean 3 dollar, which could lead to a negative exchange rate expectation, and, on the other hand, he mentions that it is also necessary to see what happens with politics, since the blue market is very sensitive to the context .

However, for the moment, the central scenario seems to suggest that there may be no change in the fixed term rate this month since everything would indicate that we will see a slowdown in inflationary momentum in the May data.

Source: Ambito

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