After the reduction in rates and the adjustment of inflation expectations, several analysts begin to evaluate the Government’s strategy, designed to maintain the downward trend in prices.
The market has already set a date for the decline of the “crawling peg”, after the publication of the Market Expectations Survey (REM) and the surprise rate reduction ordered by the Central Bank. President Javier Milei had indicated that if inflation remained at October levels (2.7%) for two months in a row, the pace of the “crawling peg” (daily increase in the official dollar), which is currently 2% monthly, reducing it by half.
Specifically, the analysts consulted by the BCRA They estimated monthly inflation of 2.8% for Novemberthat is, 0.1 percentage point (pp) less than in the previous REM but one tenth more than the October CPI reported by the INDEC. For Decemberthey projected a new rebound until the 2.9%. However, for the Ministry of Economy, that 2% of the “crawling” puts pressure on a more forceful drop in prices, acting as “induced inflation.”
As the consumer price change index for December will be published in mid-January, the The market assumed that said correction would come into force only at that time. Likewise, it is anticipated that the interest rate cut will be implemented next January. “We consider that there is a possibility that the reduction of crawl takes place in mid-Januaryonce the inflation data for December has been published. This is because one of the requirements to make said reduction is that inflation in November and December be below 3% monthly. Furthermore, the market is anticipating this scenariowhich is reflected in a slight decrease in implicit inflation rates between January and February,” he expressed Second DerdoyInviu analyst Scope.
dollar pesos
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On the other hand, PPI analysts considered that given the expectation that the “crawling peg” will be reduced from 2% to 1% monthly, if inflation is around 2.7% from October to November and December, “certain investors could see room for rates in pesos to continue compressing.”
In that sense, they issued a warning about neutral or negative rates: “Beyond the fact that an additional rate cut is expected in line with a slowdown in the crawl and inflation, It is essential for the sustainability of the exchange scheme that an attractive spread is guaranteed between the rate in pesos and the rate of devaluation. Both exporters and importers they would have incentives to extend the ‘carry trade’ as long as this spread is sustained and the BCRA shows high liquid reserves.”
What other data did the REM show: official dollar and rates
According to a report by Cohen, “REM analysts predict that December will close at $1,021/USD (+2% m/m average) and December 2025 at $1,250/USD (+22.3% yoy). This would imply a devaluation rate of 1.9% m/m in 1Q25, 1.7% m/m in 2Q25 and 1.6% m/m in the second half.”
“In this way, the appreciation of the exchange rate would continue in 2025 without discrete jumpswith a ‘crawling peg’ higher than that maintained by the Government, but lower than that implicit in asset prices. Regarding the BADLAR rate – considering that the projections were made before the recent reduction in the monetary policy rate – it is expected that in 2025 it will remain above inflation and the monthly devaluation. Adjusting the estimate to the recent reduction of 300 bp, it would be aligned with the expected monthly inflation,” they explained.
Source: Ambito
