He market revealed its expectations on the development of the Argentine economy for the coming months. The Central Bank published the Survey of Market Expectations (REM), where analysts projected that Inflation will hardly break the 2.5% floor, at least until April.
The market and its inflation forecasts
The market once again published its projections about how the national economy will continue to evolve under the command of Javier Milei and Luis Caputo. In this sense, one of the main points to analyze was the deceleration of inflation for the end of this year and the beginning of 2025.
In detail, the data provided by the BCRA’s REM indicated that, although the inflation index will continue its reduction, can hardly pierce the 2.5% floor. The forecast indicates that this trend will continue, at least, until April. Furthermore, for the accumulated over the next 12 months, 35% is expecteda number that is six percentage points below what the last REM indicated in September.
Regarding the near future, the city’s main analysts projected a inflation of 3% for Octoberwhen previously the forecasts were around 3.4%. For November, the consulting firms and financial entities that provided their analyzes predict that the price increase will finally pierce 3%, another improvement in expectations if we take into account that in the previous REM they expected a 3.3%.
Looking ahead to the last month of the year, the city’s experts explained that the inflation is usually seasonally higherdue to the effect of the end of year holidays. In this way, private sector actors foresee a greater variation than that of November, which will be located in 3.2%, although lower than the 3.6% that was previously expected.
Finally, the analysis reported that, during October, there was strong demand for public securities in pesos at a fixed ratewhich led to yields compressing (especially in the long part of the curve). This reflected that investors more avidly adhered to the idea conveyed by the economic team that the CPI will extend its deceleration. Even the so-called “breakeven inflation” – which arises from contrasting the yields of fixed-rate securities with those of CER bonds – compressed their performance to an average close to 2% monthly for 2025.
What does the market predict for the dollar and GDP?
The study also focused on forecasting how the dollar and GDP growth will perform in the future. Thus, the analysts detailed that, Here in 12 months, one dollar is expected at $1,245 what it would imply an annual increase of 26.9%lower than estimated inflation for the same period.
Over the next few months of 2024, the median of the REM nominal exchange rate projections It stood at $1,021 for December. This implies a 4% increase for the last two months of the year, in line with the current crawling peg of 2% established by the BCRA.
In reference to the level of real GDP, city experts estimate an average growth of 3.6% by 2025. At the end of this year, they detailed that growth will be around 3.6% lower than 2023 average (+0.2 points compared to the previous REM). In line with the estimates received, the level of activity began to recover in the third quarter of the year, with a rise that marks a 2% increase in reference to the previous quarter.
Source: Ambito
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