On Tuesday, the central bank will hold its biweekly monetary policy meeting to decide on the reference rate. The central bank kept the benchmark interest rate (7-day repo rate) unchanged at 40% at its first scheduled monetary policy meeting in May after previously increasing the reference rate by 1,250 bps in three inter-meeting decisions. The monetary authority maintained a wide corridor delimited by a lending rate at 47% and a borrowing rate at 33%, to provide flexibility to domestic asset yields’ response to high-frequency shocks. We do not expect changes in the reference rate in the next meeting.
On the activity front, the INDEC will publish the EMAE (official monthly GDP proxy) for March 2018, also on Tuesday. We expect activity to grow 3.3% year-over-year (0.5% mom/sa). If our forecast is correct, activity would expand 4.2% year over year in 1Q18.
The trade balance for April will come out on Wednesday. We expect a trade balance close to zero, improving from a USD 112 million deficit registered in the same month of 2017. If our forecast is correct, the rolling 12-month trade deficit will decrease to USD 9.7 billion from USD 9.8 billion in March.