The central bank cited the positive evolution of core prices over the last few months
Argentina’s central bank kept its benchmark interest rate (7-day repo rate) on hold again, at 28.75%, at its second monetary policy meeting of December (and the last of the year). The decision was expected by both us and market (Bloomberg).
The central bank cited the positive evolution of core prices over the last few months. In the press release accompanying the monetary decision, the central bank stated that the three-month moving average inflation broke the persistence level observed in previous months. Using this metric, we estimate an annualized core inflation of 18.4% (1.4% per month), down from 19% in October (1.5% MoM) and 21.1% in September (1.6% MoM).
According to the high-frequency indicators tracked by the central bank, core inflation maintained a favorable path in December despite the recent adjustment in regulated prices. The central bank considers that the current monetary-policy stance is adequate for mitigating the impact of these adjustments and continue with the disinflation process. The monetary authority expects the consolidation of the positive core-inflation trend to facilitate the convergence toward the 10% (±2%) inflation target for 2018. We expect the central bank to keep the policy rate unchanged at 28.75% until March, amid significant utility price hikes.
Juan Carlos Barboza