Key to the fixed term: after the October inflation data, what will the BCRA do with the rate

This week, the inflation data for October was known, which was at 2.7%, and the market is closely watching what the Central Bank (BCRA) will do with the monetary policy rate now, given that the path of price deceleration was confirmed and that could be a signal to adjust, even a few hundredths, the index. However, The consensus in the city is that there will be newsat least in the short term.

In fact, that presumption was confirmed yesterday afternoon, following the monetary regulator’s regular board meeting, as no update was made. So, Analysts expect no new cuts for a few months. Many mention January as a possible time of change.

It should be remembered that the BCRA cut the monetary policy rate by five percentage points last Friday, November 1 and took it from 40% to 35% (annual nominal rate – TNA). It is the first in five and a half months that this variable was modified, since the last drop was on May 14 of this year.

With this new cut, The Monthly Effective Rate (TEM) became 2.92% and the annual effective rate (TEA) was 41.19%. Thus, the monthly performance was below the inflation figure for September, which was 3.5%. That was before the October consumer price index (CPI) published by the National Institute of Statistics and Censuses (INDEC) was known, which was released on Tuesday, November 12 and The rate set by the BCRA was actually positive with respect to that indicator, which stood at 2.7% (0.2 percentage points in favor)..

Fixed term: what banks do

It should be remembered, however, that Banks no longer apply regulated rate to fixed termbut they set it according to their criteria and are currently paying between 38% and 32%, depending on the entity. Some choose to give a better performance because They need greater liquidity to face an increase in credit demand that is seen these days. And the counterpart to a drop in deposit yields is a lowering of credit prices as well. Many dismantle the LEFI to counteract this greater demand for pesos, but others do not have those instruments under their belt and resort to seeking more.

In that context, Horacio Miguel Arana, economist at the International Bases Foundation, observes that they do not believe “that the interest rate will drop after the inflation data.” “No, in the very short term, at least,” they clarify. And the analyst observes that “the last reduction that was applied on the first day of November was ahead of what they saw was going to happen with the October price data.”

Along the same lines, he points the economist Christian Buteler when he states that “the BCRA already lowered the rate a week ago and did so with October’s inflation data, which was positive, in mind.” and anticipates that It is likely that the Government will wait to confirm that the path of inflationary deceleration will continue forward to make new decisions regarding the rate.

When will there be new rate cuts?

“We have already started to play at a finer level than when inflation was higher. We saw that There was no news about it this Thursday, after the meeting, so it is not expected that they will make changes in the short term,” he points out.

Thus, Arana anticipates that, “If the good general data and the drop in inflation continue, it is likely that the BCRA will try to cut the rate as soon as possiblein addition to reducing the pace of the ‘crawling peg’, just as the president said.” Along these lines, he does not rule out that, in the future, there may be a lowering of the monetary policy rate.

However, the analyst Salvador Di Stefano warns that “heThe current effective market rate of return, raised to 12, is around 37% and the monetary policy rate is 35%. Everything indicates that November inflation may be equal to or higher than October,” so he considers that this is one of the main reasons why it is not expected to be touched again soon.

“The first week, as measured by Foundation for Latin American Economic Research (FIEL), gave 3.5% monthly. Until December, they will have higher price data,” he predicts. And, consequently, he does not rule out that “there may only be news about the rate after January.”

Fixed term: what the BCRA is going to do with the rate

And in November, fuel prices rose again and other impact increases were recorded in the CPI. In fact also the last Market Expectation Survey (REM) of the BCRA He anticipated an acceleration in prices in December, in that case, seasonal, due to the greater consumption that occurs during the year-end holidays and summer vacations.

So, Camilo Tiscornia, director of CyT Economic Advisors, He says that “there is a seasonality issue in November and December that will slow down the inflationary deceleration.” This would confirm the idea that there will be no new forward rate changes soon. Likewise, consider that everything depends on the criteria that the BCRA takes to regulate that variable.

“If what they decide is to follow inflation, the previous criterion is applicable, but, if what they seek is to regulate the exchange rate and control the gap,” they will not want to encourage a greater liquidation of dollars. with a change in that variable. Tiscornia believes that this last time the BCRA cut the rate because the exchange rate gap is calm and so is inflation, which implies little risk. And he anticipates that, now, “maybe wait a bit for inflation“.

What is certain is that vWe are still going to be very cautious going forward because of the memory of the strong exchange rate jump that was seen in May after the rate cut that was ordered after an improvement in the inflation data. That measure that caused parallel exchange rates to skyrocket. The Government does not want that to happen again, although the dollar at this time is at very low price levels and with a very limited gap with respect to the official price, which suggests that it still has a way to go up without reaching levels of alarming price.