1. Inflation
The beginning of 2025 is aligned with the projections of the economic team, The end of January is expected that the consumer price index (CPI) will be below 2.5%. The official fact will be published on February 13 by INDEC. According to the market expectations survey (REM) of the Central Bank, 2.7% was estimated for the month of January, which suggests that It will be difficult to reach a figure below 2%.
To achieve this goal, the Government decided to adjust the crawling PEG (the gradual depreciation of the weight) from Februarywhich means that the effect of this measure on inflation will be reflected in the data published in March.
2. Tax drop
The decrease in inflation in January, compared to 2.7% of December, is mainly attributed to the elimination of the country tax, which reduced the cost of imported products and supplies. In addition, the price of meat was stabilized, whose strong increase had affected the December indexes. But for February, it is confirmed that the increase in this important consumption for Argentines will be between 5% and 10% and a pricing validation will be difficult due to the sharp fall in demand.
In order for inflation to continue its course, it is also essential Control the dollar. It should be remembered that the blue dollar only rose 0.4% in January, while the MEP fell 0.5% and the CCL 0.1%. This bearish trend is the one that seeks to maintain Luis Caputo’s team, as seen, for example, when it was chosen to reduce retentions. The 80-20 scheme, which favors the offer of dollars, facilitates that the currency flow continues through the CCL, reducing the possibility of sudden fluctuations in financial dollars.
According to Econviews, after this measure it is estimated that the government can achieve the liquidation of more than US $ 3,000 million with a fiscal cost of 0.5% of GDP, that is, a practically null fiscal cost.
3. Volatility reduction
In addition to increasing the offer of dollars, The Ministry of Economy showed that it can intervene in the market, using reserves to avoid increases in exchange rates. Between mid -December and end of January, the sale of reserves exceeded US $1 billion, a figure that, although it is not so high compared to other periods, represents a “burning” of currencies to support the exchange scheme. This opportunity was also taken to absorb leftover weights in the market, which increased due to the increase in the demand for money towards the end of the year, driven by parties and vacations.
Another point no less, is the low interest rate. The risk of this decision is that the Carry Trade ceases to have attractiveness. The need for rates to remain positive in the market is what will prevent the overheating of the dollar, hence the precaution not to lower the interest rate too much.
4. Fresh funds and reservations
The agreement with the IMF was one of the most anticipated news, but with few advances. At the moment, the details of the negotiation are uncertain. Even Luis Caputo came out to clarify that none of the circulating versions (elimination of immediate stocks, flotation and devaluation bands) would be requirements for access to dollars that the Ministry of Economy needs. “Nothing that is being said about the agreement with the fund is correct. It is difficult It is something to solve in the month of February after the visit of the agency’s technical team.
Another issue to take into account and to follow this month, is linked to reservations. Although the Central Bank had a buying position in January (US $ 118 million), January was not characterized by being the best month. In February, two factors could favor the agency commanded by Santiago Bausilli, according to LCG: 1) the advancement of agriculture settlements. 2) Incentives to Carry Trade, which will still be generated with the rate cut.
5. Real economy
LA economic activity continues to show positive signals which anticipates that the rebound in 2025 is a fact: In January, about 70,000 cars were sold, one more double number compared to the same month of 2024. In addition, there is an increase in the sale of departments and the delivery of mortgage loans, while the Formal and informal wages show a recovery against inflation. However, the risk with salaries is that this year they will not rise as much as last year.
The objective of putting a “roof” to influence the price scheme and inflation decline, It puts limits to an important leap in consumption.
Source: Ambito
