According to the latest Survey of Market Expectations (REM) of the BCRA, the private sector expected an inflation of 59.2% for all of 2022. However, from the jump in March it is expected that the next projections will already place the number above of 60%.
In this context, the Central Bank raised the monetary policy rate by 250 basis points, which governs the Leliqs offered to banks.
Thus, the new nominal annual rate (TNA) is 47%, equivalent to a 58.7% effective annual rate (TEA). At the same time, the minimum TNA of retail time deposits rose to 46%, which is equivalent to a TEA of 57.1%.
The entity led by Miguel Ángel Pesce argued that the jump in inflation has more to do with a negative supply shock than with a demand shock, generated mainly by the effects of the war in Ukraine on international prices.
In that sense, he explained that the objective of the rate hike “is not to moderate the demand pressure, but to cut the second-round effects of the initial price increase, preserve monetary and exchange stability and protect the savings in pesos of the y Argentines, avoiding incentives that accelerate dollarization”. “The rise in rates is a necessary condition but, by itself, it is not sufficient to reduce inflation,” he deepened.
At the same time, the BCRA has been accelerating more and more the rate of advance of the price of the wholesale dollar. In March, the currency rose 3.3% and in April, with less than half of the month covered, the currency already advanced 1.8%. For its part, the monthly yield of the fixed term, which a month ago was 3.6%, is now 3.8%.
The financial entities and consultants that participated in the March REM estimated an increase in the exchange rate of 51.1% for all of 2022, a value that would be behind both inflation and yields in pesos. However, with the higher adjustment in April and the latest inflation figure, expectations may change.
It is worth noting that, although a greater devaluation avoids losing exchange competitiveness, at the same time it generates greater pressures on inflation that is already difficult to control. Therefore, it is feasible that the Government and the BCRA try to make the “green ticket” increase below general prices.
Source: Ambito
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