2023-04-18 16:42:00
inflation of March was 7.7% and set up the highest management Alberto Fernandez and therefore of Sergio Massawho hoped to locate it from April with a 3 ahead. In this sense, what is expected is that the Central Bank of the Argentine Republic (BCRA) adjust the interest rates given the need to maintain exchange rate stability and mitigate the increase of inflationary indices, for which you have limited options.
CPI for March set fire to April. According to the consultant Ecolatina, in the first fortnight of Aprilthe rise in prices registered an increase of 7.3% compared to the first half of March.
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And adds the consultant: “This confirms that inflationary dynamics would be consolidating a higher floor following the acceleration evidenced during the first quarter, even though it is a month with fewer increases punctual as those seen in March ”.
I must be added the blue dollar soar that registers on April 18 a new nominal record when trading this Tuesday $409 for the purchase and $412 for sale, which will end up pressing the IPC of the current month.
“The CPI is more related directly to financial dollarsbut the blue has an impact more than perspectives. The market sees that the blue rises and begins to cover”, he warned Andres ReschiniF2 Soluciones Financieras analyst, when consulted by this means.
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“This followingnoon (Tuesday April 18) tWe have a meeting where we are going to see the data updated on how inflation comes from April. This because the last thing we had seen did not register the impact of the soybean dollar 3the drag of the month of March, among other factors,” a senior BCRA official told PROFILE in off the récord.
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“When today we analyze all this data we will begin to decide for Thursday what is done or not done with respect to ratesbut for now, until you see those numbers there is nothing new”, added the official referring to the board meeting that the Central will have on April 20.
The crossroads facing the BCRA
“We are on very difficult ground today.”, warns the economist Natalia Butterfly. The trade off between staying in local assets vs. switching to foreign currency is increasing. “Investors already discount that there will be a correction of variables with a unification of the exchange rate. Therefore, the cost of remaining in instruments in pesos is very high. So they demand higher and higher rates from the BCRA”, he added.
“There are two problems there”
“There will be a default in pesos. The interest ball is getting higher and higher. There will come a point where there will be no other to devalue to liquefy it,” Motyl pointed out as the first problem.
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And as a second: “It hits you on activity and on key sectors such as construction and manufacturing production They are having trouble financing. It hits the indebtedness of families and companies with very high rates, which might have an impact on activityd, labor market and real wages. The latter, in an inflationary context, is the scenario that the Government should avoid. Therefore, raising rates is difficult,” said the economist.
A difficult decision to make
“Now we have to do it because a run once morest the peso can lead to hyperinflation. So there is a 60% chance that the rate hike will be 250 pb. Enough for the nominal interest rate Don’t lag too far behind inflation and enough so that it does not impact activity either”, added Motyl.
“The subject is not simple. If you don’t raise it, there’s going to be a lot of pressure on alt dollars. He must raise it, but if he raises it, the interest generated by the high PR load will erode the BCRA’s meager net worth, ”he added for his part. Reschini.
Here are three points of what will happen, according to the financial analyst consulted by PROFILE. “1) they are going to upload it. Not to the point that I will equate March inflation because it would be 92% of TNAbut if they are going to locate it some dots above 80% TNA ”.
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“2) They are going to speed up the official exchange rate a bit so that BCRA assets adjust faster and interest does not eat up equity net of the entity; and 3) it will be necessary to see if the market is satisfied and the alternative FX does not continue to climb. The panorama is not easy at all with this schemea”, estimated Reschini.
In this way it is clear that The Central Bank is at a crossroads when deciding on interest rates because you have to balance various goals and factors that may conflict. On the one hand, the BCRA will seek greater price stability and avoid more runaway inflation. On the other hand, the agency will also seek to promote economic growth, which requires lower rates to stimulate investment and consumption. A dead end.
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