Fixed term: what will the Central Bank do with the rate and when will it communicate its decision?

It should be remembered that the inflation June, which is measured by the National Institute of Statistics and Censuses (INDEC) through the Consumer Price Index (CPI), was 6%, below all forecasts, and, given this data, the BCRA decided to keep the traditional fixed term rate, after that for the second consecutive month the monthly inflation recorded a significant slowdown compared to the previous month.

The Fixed deadlines traditional have an Annual Nominal Rate (TNA) of 97%, which is equivalent to a effective monthly return of 8%. “So, the interest rate comes real positive in recent months because he beat the inflation 7.8% in May and 6% in June”, explains Martín Kalos, director of Epyca Consultores, to Ámbito.

However, for July and August a acceleration of inflation as a consequence of different variables, among which stand out the measures that they raised the exchange rate for importers and the implementation of the dollar corn and the jump of the parallels of the last time. Thus, the forecasts of the main consultants of the City anticipate that the inflation data of the seventh month of the year will be above that of June and they expect the same for August. In that context, what will the BCRA with the rates?

What will the BCRA do with the fixed term rate?

“We hope that the BCRA keep the yields at least until the October generals. Our numbers tell us that the July inflation will be around 7%, with which, the fixed term rate At 8% per month, it is still positive in real expo terms (compared to previous inflation) and also ex ante (compared to the August data)”, answers the question Lorena Giorgio, Chief Economist at Equilibra. Thus, she points out that there would be no reason for the BCRA will touch the rates this month

In the same sense, the economist from the University of Avellaneda Pablo Ferrari points out, who assures that, “since the BCRA has followed the inflation with the policy of rates I shouldn’t upload it.”

Kalos agrees with this view when he maintains that, after the acceleration expected from August for the inflation“it is unlikely that a low rates and most likely it will remain as it is. Likewise, he considers that the fact of not modifying them can be a gesture to temper the inflationary expectations of August.

However, Ferrari points out that, perhaps, on this occasion, the BCRA arrange a raise fixed term rate in order to give an early signal to stop the migration to the dollar. But Giorgi considers that the dollarization pressures of the market, at this moment, respond clearly to electoral issues, given that there are a few days left for the STEP and that they will then continue towards October, for which reason, it indicates that “it is difficult for the rate to do anything to control the electoral dollarization”.

Fixed term: when there will be news

But, as the economist Federico Glustein points out, since the BCRA announces its rate policy decisions after the INDEC CPI data is releasedThat decision will only come post STEPsince the data of inflation July will be published on Tuesday, August 15, and the elections are this Sunday, August 13.

In this scenario, he considers that “there is no possibility on the horizon of making that movement without counting the result of the PASSED and the movements that may arise in this regard”. Thus, Glustein outlines two possible paths:

• “If the market reacts harmlessly to the election resultthere is potential to not modify the rate this month given the inflation indicatorswhich have not accelerated in recent days and weeks ”, he describes, on the one hand.
• And, on the other hand, he mentions that, if the market reacts, there may be a possible small inflationary rise as a product of an acceleration of the exchange rate and a transfer to prices that the macro context predominates. In this case, it does not rule out an adjustment in the nominal rate of the forward fixed term.