With inflation on a downward trend, the challenge for the Government and the BCRA will be to maintain macroeconomic stability in a context of high global volatility and internal demands for fiscal and exchange rate consolidation.
The estimates of inflation corresponding to December suggest that the index could be below 3% monthly, consolidating a trend of moderation in prices that has been recorded in recent months. According to surveys by private consulting firms, the estimated range is between 2.3% and 2.9%with a median of 2.6%barely higher than 2.4% reported by INDEC for November. This information will be key for the decisions of the Central Bank (BCRA)which evaluates adjustments in the rhythm of the “crawling peg” and in the reference interest rate.
What do consulting firms predict for inflation and the dollar?
The daily report of Facimex highlights that private measurements of core inflation—which exclude volatile elements such as fresh food and energy—would be in a range between 2.5% and 3% monthlysuggesting some pressure on structural prices despite the overall moderation. This is relevant, since core inflation is usually a more stable and predictive indicator of price behavior in the medium term.
For its part, the consultant Delphos anticipates that the December CPI would be between 2.2% and 2.5%which would be enough for the BCRA to consider a slowdown in the “crawling peg.” This adjustment would imply reducing the rate of depreciation of the peso 2% monthly current at 1%in line with the Government’s exchange stabilization objectives. Furthermore, Delphos points out that lower inflation could provide room for gradual cuts in the nominal annual rate (TNA)currently in the 32%.
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The BCRA defines the new interest rate
The Central Bank has given signs that it could adjust its monetary tools to accompany the inflationary slowdown. According to Alejandro Giacoiaeconomist Econviewsif the inflation data for December remains close to the levels of October and November, the BCRA will reduce the pace of the “crawling peg”, as had been previously announced.
Salvador Di Stefanoa market analyst, is more cautious and warns that a cut in the interest rate before March could generate pressure on the exchange rate due to the seasonal drop in demand for pesos during the summer months. “The rate cut could go from 32% to 30%, but a larger movement should wait until the demand for pesos stabilizes, probably around March or April,” he explains.
The vision of Eric Paniaguaof Epyca Consultantscomplements this analysis. According to him, if inflation expectations for 2025 stabilize in a range of 30-40% annuallyinterest rates should be adjusted accordingly. This would allow a balance between price stabilization policies and maintaining the competitiveness of the exchange rate.
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Impact on the exchange market and public debt
The inflationary moderation also has an impact on the debt market in pesos, where the Treasury faces important maturities in the first quarter of the year. From Delphos warn that the combination of high maturities and exchange volatility could lead the Treasury to offer more attractive rates in its tenders to guarantee successful debt refinancing.
Additionally, expectations of a slowdown in the crawling peg could encourage greater stability in peso yield curves. This would be essential to avoid additional imbalances in the exchange market and contain possible pressures on the official dollar and financial exchange rates.
A cautiously optimistic scenario
The convergence of stabilized inflation below 3% monthly, a possible adjustment in the “crawling peg” and the gradual reduction of interest rates could mark a turning point in Argentine economic policy. However, analysts agree that these adjustments must be implemented with caution to avoid imbalances that affect the stability achieved so far.
The inflation data for the City of Buenos Aires, which was released this Thursday and showed 3.3%, is a key preview of the national result that the INDEC will publish next week. With inflation on a downward trend, the challenge for the Government and the BCRA will be to maintain macroeconomic stability in a context of high global volatility and internal demands for fiscal and exchange rate consolidation.
Source: Ambito
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