Fixed term: faced with a slowdown in inflation, what will the BCRA do with the rate

This week the Consumer Price Index of the City of Buenos Aires (IPCBA) was released, the first official number of October inflation that is published and that was at 9.4%. Some private consulting firms also expect it to be below 10% and that would indicate that there was a slowdown in the month. Only next week will the official data be known, but the market is already risking what the Central Bank (BCRA) will do with the rate this month.

It is worth mentioning that BCRA decided to strongly increase the annual nominal rate (TNA) of the fixed term and Liquidity Letters (Leliq) to 133% last month from the previous 118% annual rate after the INDEC published September inflation, which marked 12.7% and slightly exceeded the 12.4% in August. What will you do in November if the expectation of a slowdown is confirmed?

The Economist Pablo Ferrari he says Ambit that, “given that the CABA CPI was lower than in September, it could be expected that the national CPI will be lower as well” and considers that this means that there are no reasons to raise the Reference rateunless at this moment.

Fixed term: how the deposits come

In addition, from Analytica, economist Claudio Caprarulo points out that “the Fixed-term deposits fell 12.5% ​​in October in real terms.” This responded to so much electoral uncertainty, which accentuated the dollarization of investments and the preference for liquidity. Thus, in the face of this dynamic, everything would indicate that most likely to maintain the rate at current levels.

“Surely, the BCRA will continue with the trend of keeping it similar or slightly above the expectation of inflation with the aim of consolidating deposits in pesos in the system and avoiding adding pressure on the illegal dollar,” he points out. the economist Ricardo Aronskind.

In a similar vein, the economist Christian Buteler when he maintains that, “given that private consultants and CABA measurements anticipate that inflation marked a slowdown in October compared to the previous month.” And, in that sense, he anticipates that, taking this variable into account, it is expected that the BCRA will keep the rate unchanged this month.

On the other hand, one path that is proposed is a possible lowering of rates, given a moderation of inflation. This is how he puts it Camilo Tiscornia, director of CyT Economic Advisors, who points out that “one move could be to reduce it given that October inflation is going to be lower than that of September and August.” But he warns, on the other hand, that the price dynamics November is probably higher, so he doesn’t think it’s the best option.

Caprarulo believes in this regard that, “beyond the fact that the inflation shows a reduction in October compared to September, it would not be advisable for the BCRA modify the economic policy rate.” Among other things, because it anticipates that, in November, the trend is that the inflation rises again.

It happens that the exchange rate will affect prices and, taking into account that it is very likely that, after the runoff, the Government will lift the freeze on the official dollar, something that could happen even sooner, that will have its effect on inflation.

Fixed term: what will the BCRA do with the rates?

The same is proposed by Buteler, who considers that a slowdown in October does not justify the BCRA progress in that sense because one month’s data does not speak of a consolidated trend.

All in all, Tiscornia says that “it is increasingly difficult to make a forecast” in the current context of uncertainty. She believes that a lowering of rates It could be a move with political content, but, taking into account the perspective going forward, it will most likely leave it at the same level as the current one.

And it is that, with a TNA of 133%, it guarantees an annual effective return (TEA) of 253% and a monthly rate (TEM) of 11%the first above the expected annual inflation and the second with many possibilities of beating the October CPI, which would guarantee a real effective return on the fixed term in both cases.