He Central Bank of Uruguay (BCU) defined a new cut of 25 basis points in the interest rates and the decision surprised some of the analysts, since there were some signs that indicated that the Monetary Policy Committee (Copom) was going to lean towards a pause.
One of those who spoke in this sense was the managing partner of Gaston Bengochea broker, Diego Rodriguez, who admitted in dialogue with Ambit that I did not expect the cut that left the Monetary Policy Rate (TPM) at 9.25%, although he attributed it to “a decision that has macroeconomic policy flavor,” possibly seeking the objective of “cushioning” a fall in the GDP.
“The decision surprises me, when there were some signs in the last Copom minute that indicated the opposite,” he acknowledged. Rodriguez, who maintained that the yield curve for bills in pesos “is quite flat at 9.5%, but with a certain slope for slightly longer terms.”
The analyst highlighted that “the latest data from inflation “It allows the government to somewhat reduce its contractionary monetary policy,” but warned that a variable to take into account “is the growth prospects of the economy, which had been revised downwards.”
This is why he considered that the monetary authority could have made “a decision “that has macroeconomic policy flavor” and graphed: “It is like saying ‘I contribute on my part to ensure that the economy does not contract further’, especially after the latest data on industrial activity was not good, beyond the fact that it is ‘dirty’ due to the stoppage of the refinery Ancap.”
A different vision
When asked about the 25 basis point cut in the MPR, Giuliano Cantisani, supervisor at CPA Ferrere, He expressed himself in another line when considering that “the decision was in line with what was expected.”
“With this low TPM The contractionary zone continues to lie, since it is located above the neutral rate, which would be close to 9% according to the latest estimates of the BCU and the inflation expectationshe proposed Cantisani to Ambit.
Meanwhile, through his social networks, economist Aldo Lema admitted that “market expectations were divided between said cut and a pause,” while analyst José Licandro indicated that it was “within expectations,” but clarified that ” the contractive phase maintains its tenor”.
What can happen in the future?
When analyzing the future of rates, Cantisani assessed that “if it is desired to maintain the contractionary bias, there should be no additional cuts in the “TPM” and gave as an example the inflation expectations.
“Both analysts and businessmen and the arbitration of rates have shown a decrease in inflation expected for the next 24 months,” he highlighted, although he acknowledged that “despite this, in all cases they remain outside the target range of between 3% and 6%, although on average they have approached its ceiling.”
“If he BCU “It aims to anchor expectations in the goal, it should not turn to an expansive policy,” said the CPA economist Ferrere, but did not rule out more cuts. “Copom indicates that we would be ‘close’ to the end of the rate reduction, which suggests that additional reductions remain,” he evaluated, which is why he asked to wait for the evolution of inflation and its expectations.
About, Rodriguez He indicated that Copom used “language similar to that of the previous minute, so one has to read between the lines.” Thus, he observed that “it is unlikely that there will be additional cuts, but now we are probably closer to the end of the rate cut.”
Along these lines, the Bengochea representative maintained that “nominal rates are still high” and assessed that “businessmen’s inflation expectations began to moderate.” “It is a good sign that gives some slack to the BCU to make that decision to cut,” he said.
Source: Ambito
