Confirmed: as expected, the Central Bank did not raise the fixed term rate

This Wednesday the market was already commenting that the BCRA would leave the performance indices of the instruments in pesos as they were until now, but the measure was still being discussed within the Central and, as Ámbito had anticipated, it was a key issue in board meeting this Thursday, in which positions were presented for and against advancing with a rise in rates given the upward inflationary trend.

Fixed term: why the BCRA decided not to raise the rate

In the statement, the BCRA points out that the monthly acceleration in the rate of increase of the CPI was explained almost entirely by increases in the Seasonal (mainly vegetables and tourism) and Regulated (especially transport, gas and communication) categories, while Core inflation, which reflects the more trend behavior of the general price level, it was located at a level similar to that of December (5.4%, +0.1 pp).

“In this way, interest rates continue in positive territory in real terms, which guarantees the protection of savings in pesos and contributes to keeping exchange expectations anchored, favoring the disinflation process”, indicates the Central. Given that, as indicated, the monthly yield of the fixed term, today, is 6.2%.

Thus, as explained by the economist and director of EcoGo, Sebastian Menescaldi to Ambit, the decision not to raise the yield percentages was made based on several elements. “On the one hand, the truth is that the government maintains, even despite inflation, a rate that is still positive in real terms”, he states in the first place.

That is why it would not be necessary to raise the rate and the economist considers that “it is very important to preserve this tool still.” And it is that, he indicates that, “just as they did not lower the rate when inflation decreasedtoday they still have some degree of freedom to keep it neutral”.

In addition, Menescaldi believes that “a sudden rise may be a bad sign.” He refers to the fact that a decision of this type could send the message to the market that the BCRA sees an acceleration of inflation and not a specific rise in January that would be reversed in February due to the effect of the economic policies of negotiation with the makers of prices.

The issue is that they had a lot of influence some seasonal factors in last month’s data and many point out that it is not clear that the rise is marked by food, so that a rise in rates at this point could be an overreaction.

On the other hand, Menescaldi maintains that “we have not yet seen great stress in the peso market.” For now, as he points out, “everyone is still playing the weights game, and they haven’t taken their feet off the plate.”

Thus, the Central decided, for the moment, to wait before making a new decision on rates, which has not changed since September 16, 2022. Surely, they will see how inflation will evolve for at least the next few years. two months to take a step in that direction.