ARGENTINA – Central bank left the monetary rate unchanged at 28.75%

We expect a further 100-bp increase in the policy rate. However, the increase may not come by the end of this year, as we currently expect.

Argentina’s central bank kept its benchmark interest rate (7-day repo rate) on hold, at 28.75%, in its first December monetary policy meeting based on benign inflation numbers in November and despite a new increase in the inflation expectations according to the latest Central bank’s survey. The decision was in line with our  and market expectations (Bloomberg).  This is the second consecutive time that the central bank leaves unchanged the policy rate.
Inflation decelerated for the second consecutive month in November. Consumer prices gained 1.4% from October to November, and down from 1.5% and 1.9% registered in October and in September respectively. Core inflation rose by 1.3% MoM, repeating the October´s reading and taking the three-month moving average to  an annualized 18.4%, from 19% in October and 21.1% in September.

In the press release accompanying the monetary decision, the central bank noted that according to its high frequency indicators,  core inflation maintains its favorable path in December. The central bank considers adequate the current monetary policy stance despite a new increase in inflation expectations for 2018 according to the latest Central Bank survey, now to 16.6% from 16% previously.

Given the challenging environment for inflation, we expect a further 100-bp increase in the policy rate.However considering that recent inflation data was favorable, the increase may not come by the end of this year, as we currently expect.

 

Fuente: ITAU

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Finanzas Sector Público / Fiscal