After knowing that inflation in February accelerated to 6.6%, and preliminary estimates that reflect that the cost of living in March could be even higher and reach 7%the question of what the Central Bank will do with the monetary policy rate and the performance of fixed terms was reinstated in the market.
The monetary entity maintains the interest rate of the fixed term without changes since last Septemberwhen he established the Nominal Annual Rate (TNA) at 75% for 30-day retail solutions, which is equivalent to an Effective Annual Rate (TEA) of 107%, with which the yield is 6.2% per month.
Thus, after the inflationary data for February that was higher than expected in the market, the real rate was in negative territory, in a scenario where in the last week the price of financial dollars has also overheated.
Rates: what do analysts expect?
The expectation of most analysts consulted by iProfessional is that the BCRA should raise the monetary policy rate to improve the performance of fixed terms, and put a cold cloth on an incipient dollarization.
In addition, economists highlight it is a key issue that monitors the FMIgiven that the statement released by the Fund on Monday in the framework of the review of the agreement with Argentina emphasizes that “To cope with the continued inflationary pressures that have picked up in recent months, the (government) authorities intend to keep official interest rates positive in real terms.
In any case, economists recognize that it is not an easy decision due to the cost that this measure implies in terms of economic activity, deterioration of the quasi-fiscal deficit, and the increase in the cost of credit for families and companies.
Analysts believe that the BCRA should raise the interest rate for fixed terms after inflation data for February
The monetary institution’s board of directors will meet on Thursday, so it is probable that the resolution regarding rates will be known that day.
Rates: the core inflation factor
Sebastian Menescaldi, director of Eco Go, stated thatand “within a framework of accelerating inflation and some sign of the beginning of dollarization, it is feasible that the BCRA should raise the interest rate to sustain the demand for money.”
“Especially considering that core inflation (which does not include regulated or seasonal prices) accelerated sharply, that the greater indexation process of the economy is going to sustain high inflation levels and that prices in March would be sustaining a monthly rise of 7%,” he said.
Of the same diagnosis, Emiliano Anselmia PPI analyst judged that “it is probable that they will raise the rate” by alleging that “the BCRA has fewer and fewer excuses not to increase it, because in the statement last month they had said that core inflation was stable and that is why they did not rate it.” they went up, but now cWith the core going to 7.7% it seems to me that they run out of arguments”.
However, the analyst speculated that “if they start looking for excuses not to do it, and say that this was due to the rise in meat, ignoring that inflation was lower before because meat did not rise, not watching the full movie, they could not raise the rate,” he speculated.
The acceleration of core inflation to 7.7% is one of the reasons why the BCRA should increase the interest rate
in tune, Nery Persichini, GMA Capital strategist, said that “although the CPI variation in February was driven by the increase in meat, the core of 7.7% sets off an alarm, at the same time, the implicit expectations in the bond market put a floor of 6.4% to inflation in the coming months”.
“If the BCRA understands that this level of inflation and expectations are not transitory, then I would not be surprised if it executes the first rate hike in seven months,” evaluated.
Rates: why do you expect a rate hike?
Peaches considered whatand “there is an undeniable feeling that the rate at this level does not reachespecially when the signs of fiscal moderation are conspicuous by their absence”. And he remarked that “taking the fixed term rate (BADLAR), February had the lowest real rate since August with a TNA of -9.2%”.
With the same look, the economist Natalia Butterfly He argued that “until January there was inflation that was positioned slightly below the monthly yield of a fixed term with a TNA of 75%, but today with a cost of living at 6.6% it is already back in negative territory.”
“With the inflation data for February, due to a matter of expectations that will cause a greater drop in demand for pesos, they must react quickly so that it does not spiral and encourage de-dollarization “he founded.
He also justified that “we are facing a change in both external and local conditions that require a greater decision from the monetary policy authority.”
The IMF stressed this week in a statement the importance of the rate being positive in real
“The local drought anticipates a lower inflow of dollars in the coming months, and given a greater demand for dollars as a refuge for the peso, a higher local monthly depreciation rate is expected, so increasingly higher rates will be needed to continue attracting capital into assets in pesos that do not end up going to the dollarry, putting even more pressure on the exchange market,” he asserted.
In addition, he argued that “the difficulties of accumulating reserves and the decision to maintain a backward exchange rate make the demand for local assets even more difficult,” while he stressed that “the goals established with the IMF require positive real interest rates.”
In addition, Maria Castiglionidirector of C&T asesores, stated that “the BCRA should raise the interest rate because in the review of the agreement with the IMF there is a commitment to positive ratesand not only was inflation in February very high, but an equal or higher number is shaping up for March.”
For his part, Salvador Vitellia specialist in finance and agribusiness considered that “it sounds logical for the BCRA to raise the rate given that the Treasury is paying almost 120% of the TEA while that of Leliq fell behind at 107%, so there is room for it to increase” .
“The real interest rate for February, already with the ex post numbers (comparison against the inflation observed in the month) was left with a negative return of 0.4% in monthly terms, therefore I see it as feasible that they will raise it to cool down the circulation of weights. This hits the activity and the economy in general but it is the instrument in which the BCRA can try to face the incessant inflation that we are experiencing “, he reasoned.
In addition, Juan Pablo AlbornozInvecq economist, said that “the use of the rate in Argentina mainly seeks to put a brake on the dollar, if I raise the rate, perhaps you will look more affectionately at investments in pesos versus buying dollars.”
Analysts allege that the BCRA should raise the rate to prevent further dollarization and contain the rise in financial dollars
He stressed that “the macro is giving very clear signs that the nominal is getting out of control again and, even more importantly, the exchange outlook has been suffering a very large deterioration week by week with the downward corrections of the estimate of the soybean harvest and corn, the two main sources of foreign exchange for the country”.
“Even though the rate is a couple of basic points above the inflation expected by the REM (it projects an average monthly inflation of 5.9% for the next 7 months), not moving the rate with the inflationary acceleration that is being seen and with the deterioration of the exchange panorama could be a false step”he warned.
Rates: How much do you estimate it could go up?
Given the current situation, Anselmi estimated that “if they raise it It could be at least 200 basis points to replicate the rise in the passive transfer rate made in January.”
“In addition, in the last week financial dollars overheated so it would also be a way to contain the rise in financial dollars,” he said.
Butterfly projected that “They should at least raise rates by 500 basis points so that all the pesos do not go to the dollar.”
in tune. Menescaldi calculated that the tasa could increase between 400 and 500 points, that is, the TNA of the leliq is between 79% and 80%. He indicated that “if it goes up 400 points, the TNA of Leliq would remain at 79%, that is, a TEA of 115%, which is equivalent to 6.6% per month if it were for a 30-day month.”
