The market expects the Central Bank to continue cutting the interest rate to levels similar to the monthly devaluation rate, which is currently 2%. That is why, for some analysts, a slight correction cannot be ruled out.
The monetary policy reference interest rate could be reduced to levels of 3.4% monthly, from the current 5.2%according to a report from the MegaQm stock company.
Lower rates: the reasons that indicate that they could continue to fall
“We tend to think that at most You can think of an average rate rate that does not drop below 3% / 3.5% monthly. “That implies very little below current rates in the debt market,” the report states.
The brokerage company points out that “a new cut of 10 points would take the Monthly Effective Repo Rate to 4.2% and others 10 additional points (40%) would leave it at 3.4%, which we understand is a floor that does not seem convenient to cross.”
It is worth remembering that during April In less than 15 days the Central Bank reduced the reference rate from 80% to 70% first, and then to 60% later, which left it at a monthly level of 5.2 percent.
The report states that “it is likely that the “The decision to advance in stages is due to the uncertainty that still exists about how it may impact the level of the exchange gap.”
“Each discount announcement has implied a brief impact on the gap level which has then been corrected based on flows that continue to be settled to the CCL and a demand that remains contained due to regulatory issues,” he points out.
Thus, it is maintained that “in this way a p“more gradual process and with less volatility in the gap”. “The second question for now finds its answer in the rhythm of the crawling peg,” adds the study.
“This scheme It is not viable with an interest rate that is below the devaluation rate (crawling peg of 2% monthly). From this premise, it is clear that 2% is a theoretical floor, but that the real floor is somewhat higher,” says MegaQm.
The study indicates that the government will seek to emit less. “The average balance of Passes with the BCRA during April is located at $32.6 billion. At the 70% rate that was in force, that implied a monthly interest payment of $1.96 billion. With the new rate scheme, this emission drops to $1.67 billion per month. In short, monthly emission drops by 15%,” says the report.
On the other hand, he assures that the rate reduction was due to improve the placement of bills from last week in which the Treasury was able to renew maturities for $2.8 billionby leaving long-term instruments that offer a better rate with respect to inflation.
Meanwhile, he states that also with the reduction in the interest rate The government seeks to ensure that there is a greater supply of credit for consumers.
On the other hand, it points out that “the negative effect of lowering interest rates is very evident, but today it still does not seem to be a priority for the economic program,” warns the report, which details that with this measure “deteriorates the real demand for money, because no one wants to have their pesos invested at a rate that loses with respect to the price level of the economy.”
“But this is possible thanks to the capital controls that are still in force. Without stocks these policies would not be possible,” says MegaQm.
Lower rates: how it can affect the dollar
The analysts and market operators do not believe that the rate cut could affect the value of the dollarwhich remains stuck at $1,000 levels
Pedro Siaba Serrate, economist at Portfolio Personal Inversiones (PPI) told Ambito that “it is clear that it did not affect the financial dollars and clearly eThis decline is mainly driven by the very encouraging inflation numbers frequency of the last two weeks of April”.
“In this sense, the BCRA decided to lower the reference rate so that the real rate remains in negative territory,” he explained.
For its part, SAlvador Vitelli, from Romano Group, He maintained that after the announcement of the rate reduction there was a reduction in financial dollars, but that in the long run “there will be a realignment.” “Regarding the crawling peg, the lowering of rates puts a ceiling on it,” he said.
Source: Ambito
