ARGENTINA – Monetary Policy Decision: No rate cut in sight September

The president of the central bank stated that there is no room, at all, to ease the monetary policy.

The central bank stayed on hold, leaving the monetary policy rate unchanged at 26.25% as widely expected. In the press release announcing the decision, the monetary authority noted that, according to its high frequency indicators, the inflation for the month of September will be above any of the figures registered since May, which averaged 1.4% mom, with the lowest reading in June (1.2% mom). The central bank expressed discomfort with the current level of core inflation, which stands at 19.7% (annualized) using the average of the last three months. The press release added that the central bank will continue to pursue a stronger disinflation of core items.

The monetary authority reiterated in the statement that it will continue draining liquidity through interventions in the secondary market for short-term sterilization bills (Lebacs).

The president of the central bank, Federico Sturzenegger, recently stated that there is no room, at all, to ease the monetary policy in the coming months. The central bank is focused on bringing down inflation to around 1% mom in the last months of the year, which will be more in line with the inflation target for 2018 (10% ± 2%). For that purpose, it will maintain the “anti-inflationary bias” (meaning a tight monetary policy).

While we do not expect rate hikes, the probability of interest rate cuts any time soon is clearly decreasing, as the central bank reiterates it is committed with its ambitious inflation targets. 

Juan Carlos Barboza
Diego Ciongo

Fuente: ITAU BBA

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