Expectation for BCRA meeting prior to the decline of “Crawling Peg”: What will you do with rates?

Like every Thursday, This afternoon the board of the Central Bank maintains its weekly meeting. This time, it is In the prelude to the announced reduction of “Crawling Peg”that is, the rhythm of sliding of the dollar official. One of the points that follows the market is the Discussion about what the BCRA will do with rates.

The expectation in the City is that The entity chaired by Santiago Bausili Accompany the reduction of the rhythm of devaluation From 2% to 1% monthly that will begin to govern next Monday With a cut of the monetary policy ratecurrently located in the annual nominal (TNA) or 2.7% monthly (TEM).

The big doubt goes through the “timing”. That is, if the officials will approve a decline this Thursday or if it will wait for February, when the dollar is already running at 1% monthly.

The discussion will be on the discussion table of the board. AND Both the timing and the magnitude of an eventual cut are particularly important since in February the demand for money tends to fall By seasonal factors, with which a hurried movement could lead to an overheating of pressures on parallel dollars.

The BCRA, the dollar, the “Carry Trade” and the decision of rates

The truth is that the decrease in the rhythm of devaluation in itself will strongly reinforce the attractiveness of the rate in pesos. If it was maintained at the current level, the monetary policy rate would pay from February 1.7% monthly in dollars. It is a very high level, which would reinforce the incentive for “Carry Trade” and to take credit in foreign currency On the part of the companies, two pillars of the strategy of the economic team to sustain its scheme of exchange appreciation.

Although A limited cut of the rate would also keep it at high levels Regarding the new rhythm of devaluation. During January, the spred between the Lefi rate and the “Crawling Peg” was 0.7% monthly, and The 1816 consultant estimated that if the BCRA low.

Anyway, At the City’s tables they believe that, if there is a rates touch to minimize the risks of overheating exchange pressures.

BCRA rate and intervention

A sample of the cost that could imply a hurried movement was provided days ago by the vice president of the central, Vladimir Werning, during a presentation in London before investors. In one of the graphics he presented, he showed that During the first half of January the monetary authority used US $ 619 million to intervene over financial dollars and contain the exchange gap.

While accumulated purchases in the official market were higher than sales in the financial market, the truth is that The government is urged to maintain its exchange anchor scheme (with which it seeks to resume the deceleration of inflation) And to approach the length of the stocks.

Measures with the methodology of the International Monetary Fund (IMF), today Net reserves are negative at about US $ 10,000 millionaccording to personal investment portfolio calculations (PPI). And in the next few days you must face an interest payment to the agency for about US $ 650 million.

Evidence of the need to make currencies was the design of the temporary reduction of retentions. To access the trimmed aliquot of export rights, cereals must liquidate dollars in advance.

Meanwhile, The other bet is to try to accelerate the agreement with the IMFwith which the government intends to access new indebtedness that allows it to strengthen the BCRA coffers. The key will pass in case the program will contemplate an initial disbursement or if the money will arrive in comfortable installments. The former Argentine representative in the Board of Directors, Héctor Torres, considers that this will depend on how the discussion about exchange policy is resolved. The agency asks for a flexibility of the “Crawling Peg” that Luis Caputo embraces to prevent the exchange delay and a concrete path towards the lifting of the stocks.