Central Bank decided not to raise rates for the second consecutive month
One of the commitments assumed with the FMI understands that the interest rate is real positive, that is, that it evolves above inflation. However, sustained high rates usually also have an effect on activity, since they make credit more expensive for both consumption and investment.
According to analysts consulted by Télam, the decision not to change the interest rate of its monetary policy, despite the slowdown in the inflation in November, It is a measure that helps to rebuild the demand for pesos and avoid a triggering of the exchange rate gap.
The objective of the monetary authority, it has been maintaining in the last communiqués, is to achieve “gradually a positive real interest rate that is an effective protection for savings in pesos, as well as an important instrument for anti-inflationary policy”.
Total, The BCRA applied three interest rate hikes since inflation accelerated in July: 800 points in July, to go from 52 to 60% annually; another of 950 points in August; and the last of 750 points in September to reach 75% per year.
The economic policy of the Government in the last five months for curb price inertia It had a fiscal leg (with a drop in real spending), a monetary one (zero direct monetary financing to assist the Treasury and rate hikes) and another for reserve management and sectoral price agreements, in exchange for greater certainty at the time of importing supplies.
Since then, it was possible to channel the program agreed with the IMF and improve the management of the debt in pesosof which all its maturities were renewed in 2022 and extra financing was obtained to meet the primary deficit goal of 2.5% of GDP for this year.
These are results that, according to the Minister of Economy, Sergio Massa, leave “conformes but not happy” athe economic team.
“I think that what the Central Bank is doing is appropriate in not lowering interest rates. The market still expects inflation around 100 percent and monetary policy rates yield 107. Lowering the rate earlier, only with positive inflation data would have been a premature decision,” he told Télam Juan Pablo Albornozeconomist at Invecq.
In this sense, he pointed out that the inflation data for November “was good”, but only “a relief regarding what we had been seeing” levels around 7% in recent months and even supported on a “deflation very strong in seasonal products”.
“I wouldn’t say we’re already seeing a very substantial slowdown in inflation. I would wait for the next two data to say there is a change in trend or not,” Albornoz said.
The position of maintaining positive real rates was one of the aspects that the interim president of the IMF, Gita Gopinathremarked as “essential” for “reduce persistently high inflation and strengthen demand for peso-denominated assets“.
This was stated by the official last Friday, following the body will approve the goals of the third quarter of the agreement signed with Argentinasince -he said- this would help to obtain “improvements in competitiveness and reserve coverage, while avoiding dependence on incentives and ad-hoc exchange restrictions, since they are not a substitute for consistent macroeconomic policies”.
In a recent macroeconomic situation report, the consultancy Analityca affirmed that “there is no place to reduce interest rates or the rate of depreciation of the official exchange rate”, another of the tools that the Central Bank manages to avoid a greater delay in the exchange rate, even with inflation somewhat more low.
As detailed, “structural” and inertial inflation reflected in core prices rose 5.8% in November in the CPI-CABA y 4.8% nationallywhile the registered salaries would accelerate until the first quarter of 2023, with the already agreed parity increases taking effect.
This is in addition to January and February are months of historic volatility in the exchange market due to the drop in the demand for pesos and the low income of dollars from the countrysidein a context of an exchange rate gap of around 80%.
“There is no room for alter the moderate change of macroeconomic regime that the government is attemptingwith positive interest rates in real terms, a greater depreciation of the peso and a significant drop in primary spending,” said the consultancy that runs Ricardo Delgado.
For the director of Anker Latin America, Federico Furiasethe space opens in the coming months so that the Government can carry out an “administration of the situation”, which would allow the BCRA “to reach March with net reserves in 3.4 billion dollars, despite the droughtalong with a slowdown in inflation “at the margin.”
“I see interest rate beating inflation and inflation beating the pace of the official exchange rate. The Central Bank will probably take more time to lower the interest rate, because otherwise you would be taking the risk of a greater exchange rate gap,” Furiase said in a presentation organized by Adcap Financial Group.
