Fixed term: what the Central Bank will do with the rates after the inflation data for December

The market throws the cards

According to Delphos Investment, there is a high probability of a slight acceleration from the 4.9% m/m in November. In this stage “A prudent attitude could lead the monetary authority to maintain interest rates pending new data that confirms the slowdown in inflation. Instead, if it were to take a looser stance it could decide to cut interest rates moderately, which would increase pressure on the CCL. The balance of risks for the Central Bank is not easy given the volatility that inflation has shown and the need to keep the exchange rate gap under control.”

It is important to remember that since the end of December, the parallel dollars have been marking an upward trend. The blue, for example, jumped $10 in a session between December 22 and 23. The MEP, in a rare moment, is a long way from the blue, at $25 below.

For its part, Ecolatina states that in December “a moderation in nominality is expected to have been confirmed”. In this context, the Central Bank “could be tempted to implement a cut in the monetary policy rate. Faced with the unstable equilibrium in which the economy will continue to move in the face of the enormous challenges coming from the “dollars” front and “the pesos”, we believe that the decision to keep the rate unchanged would be prudent in order to show firmness in the objectives of anchoring inflation expectations, keeping the exchange rate gap at bay and contributing to sustaining the demand for pesos. This is one of the keys to minimize the risks of exchange stress and/or in the debt market in pesos, at least until the reduction in the rate of inflation is consolidated and extended over time”.

In the same vein, the analyst Andres Reschini consulted byr Scope he believes that if the BCRA decides to lower rates, “we will see more pressure on the exchange rate.” “This is an electoral year, there are too many pesos, many problems that await a solution, activity is not showing good signs and the drought is severely threatening the thick harvest and the income of foreign currency, in addition there will be a lot (more) political noise that will generate volatility “.

Reschini affirmed that this year it is very probable that “The dollarization of portfolios is accentuated and even more so if inflation is not slowed down in a sustained manner. Although fixed terms have slightly positive rates, I believe that the uncertainty of the proposed scenario can play against it.”

While, Federico Furiase, Anker economist and UTDT professor, maintains that “what is clear is that the Central Bank is going to be very cautious when it comes to cutting the interest rate and is going to wait for more evidence that the slowdown in the Inflation is here to stay, it will try to take care of the exchange balance. It will prioritize not escaping the financial dollar in the election year.” Lastly, he claims that It is very possible that the monetary authority decides to carry out a “very gradual” drop in the interest rate in the year after increasing it from 37% to 75% during 2022.

Lastly, the economist Nery Persichini, Head of Research & Strategy at GMA Capital, He asserted that “it would be prudent to maintain a tough monetary policy and accelerate the positive fiscal signals of the last few months.” In this framework, he traced the path of what the investment landscape will be this year: “the movie of investments in pesos in 2023 will probably have two very different chapters. In the first part, alternatives in pesos could be an attractive vehicle for consider, given the positive real rates seen in both fixed-rate and index-linked options, but in the run-up to August, the dynamics of portfolio decisions could turn towards a dollarization process, as has happened in other years with elections. The harvest situation and international risks, however, could bring the times forward.”