The expectation of a slowdown in inflation in March reactivated market rumors of a
new interest rate cut.
The Minister of Economy, Luis Caputo, assured in the last few hours that the INDEC index (CPI) that will be known this Friday would be
"around 10%", after 13.2% in February.
This slight decrease would give the Central Bank room to continue reducing the yield it pays to banks in repos and the remuneration for fixed-term loans, a measure that
conflicts with the requests of the Monetary Fund.
Although the economic team remains cautious regarding the direction of monetary policy, consulting firms and banks are preparing for a scenario of greater liquefaction of the pesos. Already before the February CPI was known, the BCRA
reduced the repo rate last month from 100% to 80% nominal annual
(8.6 to 6.8% effective monthly) and eliminated the floor of the interest rate. fixed terms, which reduced the premium paid by banks to savers from 110 to 70% nominal annually (9.16 to 5.8% monthly),
well below inflation.
The objective is to continue reducing the demand for pesos and take pressure off one of the factors that would drive inflation, before lifting the exchange rate and moving forward in a "currency competition" in the face of the impossibility of dollarizing the economy today, without sufficient reserves. . "We are
cleaning up the Central Bank's balance sheet
and when we do so, the long-term price level will decrease and, therefore, the inflation rate will drop. Cleaning up the balance sheet is important so that this pressure does not exist," said Javier Milei. to Bloomberg days ago.
Specifically, the lowering of rates contributes to
reducing the issuance of pesos to pay the interest on passive repos.
These titles, which today take the place of the Leliqs, went from representing 8.6% to 6.8% monthly of the monetary base between December 11 and March 26, according to IERAL estimates. In this way, the Central Bank seeks to reduce the quasi-fiscal deficit - liquefying it - and the risk that the pesos of deposits in repos will run towards the dollar when exchange restrictions are lifted.
The problem is that the lowering of the reference rate also requires a reduction in the yield of the fixed-term bonds, since the banks pay these deposits with the interest on the repos and if that income is reduced they would not be able to pay a greater premium to the creditors. savers. "I suppose
they will continue in this trend of lowering rates,
it has worked until now and one falls in love with things that work, there will be a limit to continuing to reduce the BCRA deficit (the quasi-fiscal one) and to accentuate the liquefaction," they said in a bank. private.
One of the main limits is the IMF. The organization's spokesperson, Julie Kozack, raised again last week that we must "continue to improve the quality of fiscal adjustment, while
monetary policy will also have to adapt to this transition
." The Fund has been demanding positive real rates, that is, above the inflation level to encourage savings and demand for pesos. Some banks recognize that, if the BCRA continues to lower rates,
"the risk is that those pesos will go to the dollar, the risk of liquidation is very strong."
That is not the only risk if the yield of the pesos continues below the outlook for inflation and currency depreciation. According to the former Secretary of Finance and director of Quantum, Daniel Marx, this policy also generates: 1) the discouragement of the demand for pesos, erosion of the purchasing power of salaries and liquefaction of debt balances in pesos, 2)
a depreciation and capital outflow, 3) greater falls in economic activity,
and 4) a weakening of credit demand due to the greater recession.
In another bank, they stated that "part of the market expects a rate reduction in the coming days, where some see a CPI for March around 10%, for us that data is very optimistic." "To the extent that inflation continues to decline, there is room for rates to do the same, we have to see to what extent since
a fixed term is not profitable in relation to inflation
and we have to do the math with the US dollar. liquefied savings, without going elsewhere," said Eduardo Hecker, head of the consulting firm Vectorial.