“as result of the significant fall in the expectations of inflation for two consecutive months, and as it was referred, removed the floor of 60% interest rate”, said in a statement the Monetary Authority before the ru Exchange-rate EDA today. Given the agreement signed with the International Monetary Fund, the Leliq (letters from liquidity) is bid every day mark the reference rates. Yesterday this tender closed with a slightly higher to 60% interest rate. What happened? The survey of expectations of market (REM) is a survey that makes consultants and local research centres, financial institutions in Argentina and analysts abroad about their predictions about certain key variables of the economy. In the November report, spread the results of the survey carried out between 27 and 29 November. This month is watched forecasts of 53 participants (2 less than last time), which include 32 consultants and local research centres, 14 financial institutions in Argentina and 7 analysts overseas.
This record was 33.4% to August, 32.9% to September and 32.1% to October; This represents a decrease accumulated in that period by 4.4 percentage points in the expectation of inflation to 12 months. These decisions were taken in the bosom of the monetary policy Committee (COPOM) of the Bank Central, aiming to “give greater predictability about their actions in the field of management of monetary aggregates and currency intervention”. In terms of the interest rate, dropped the floor of 60%, which it had been introduced on 30 August last, under the monetary regime above and ratified on the occasion of the launch of the new monetary scheme on September 26.
Also announced new limits of the zone of not existing currency intervention during the first quarter of 2019. Using as a reference the current values on December 31, 2018, where the floor is $37.12 and the ceiling is $48,03, the limits of the area of intervention not be updated daily at a monthly rate of 2% between 1 January and 31 March of the 2019.Asimismo , this Committee established the following currency intervention strategy to be applied in the event that the exchange rate is found on the outside of the area of intervencion:si exchange rate not pierce the floor then the goal of monetary base will increase with purchases dollars made through tenders. These tenders will be in December, up to $ 50 million per day. He accumulated in the month may not exceed 2% of the goal.
If the exchange rate breaks the ceiling, the goal of monetary base will be reduced with dollar sales made through tenders. In order to maximize the impact on liquidity, such tenders will be of up to 150 million dollars a day, the maximum laid down in the monetary scheme.
what to expect?
as high interest rates was encouraging investors to stay in pesos, removing pressure on the dollar. The side effect is that it allows what is known as “carry trade” or financial bicycle.
At the same time, put an interest rate so high it precludes the credits and difficult landscape of small and medium-sized enterprises and all the national productive sector since money more “expensive”. The lowering of the interest rate is necessary but the risk that this will lead to pressure on the dollar is on the horizon. Adds that December is a month where the demand for dollars tends to rise for seasonal effects. In this note:
