Given the announcement of inflation, do interest rates rise?

This Tuesday 14 at 16 will be known the inflation data for February. Being able to reach a tie with interest rates, the Central Bank of the Argentine Republic (BCRA) could consider an interest rate validation Given the escalation of nominality, a change in the strategy proposed jointly between the BCRA and the Ministry of Economy.

The interest rate is the variable par excellence to make monetary policy. After the arrival of Sergio Massa at the Palacio de Hacienda, the authorities reinforced the role of the interest rate within its set of economic policy that, according to a report by Ecolatina includes: nailing the objectives in the positive real actions agreed with the International Monetary Fundcontain inflationary pressures and avoid a discreet jump of the official exchange rate.

After two years of relative calm in interest rates that remained intact during 2020 and 2021, in 2022, The Central executed nine consecutive monthly increases finding the roof in september in which the rate was: 75% TNA –6.3% TEMaccumulating an increase of 3,700 basic pointssince in December 2021 it was 38% TNA.

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The CPI February and the gray preview of March

It should be remembered that the interest rate defines How much does a fixed term yield or how much does it cost to pay the minimum credit cardask for a loanand in general, it is expensive to borrow.

According to Ecolatina, the BCRA still has a certain margin to support interest rates at current levels “without giving up positive real return at all.” This taking into account the measurement of the inflation of the core, that is, which does not take seasonal factors into account. However, note the document, which the situation could change when the data for February and March is known.

When making a decision on monetary policy, the BCRA would seem to prioritize core inflation over general inflationseeking to isolate any type of impact caused by a seasonal rise, a transitory shock or a political decision regarding regulated prices”, says the consultant.

input, the data for February does not look very encouragingaccording to the surveys carried out by the private sector, the indicator does not seem to give positive signals and, of course, anticipate high numbers for March. For the second month of the year, the estimates they start from a floor of 6%which, if fulfilled, would take year-on-year inflation to triple digits, something that had not happened for more than 30 years

Due to the drought, note that the Government should modify some goals with the IMF

Do interest rates go up?

Not at the beginning. Although the IMF team asked the Government keep interest rates positive official in real terms, sources close to Massa told PROFILE that the minister does not have in mind to coordinate with the BCRA an increase in interest rates.

On the contrary, Massa maintains his desire to lower inflation and reduce the cost of local financingsomething that is key to sustaining productive activity.

In this same sense, sources consulted by PROFIL express themselves in the Central bankwho pointed out that On Thursday the 16th there will be a meeting of the DirectoriToday the issue of fees will be decided. “but for now we most likely won’t upload it yet”, they glimpsed the high office.

LR