Thursday , June 17 2021

The 5 factors that will lead the Central Bank to a slow decline in interest rates



For the first time since the beginning of the new monetary scheme on October 1, 2018, zero emission at the primary level, the Central Bank intervened in the foreign exchange market. Score, or wholesaler, punching the price of the dollar in this circuit with a closing level of $ 37.10, the zone without intervention that was set for the day at $ 37,355, and which today rises to $ 37,379, according to the schedule of increase of 2% per month until the end of March.

"The intervention consisted of a purchase auction of up to US $ 20 millions, at a limit agreed at the last meeting of the Monetary Policy Committee on January 2, up to $ 50 million, to $ 37,305, five cents below the minimum value of the non-intervention zone, "he explained. Infobae a source at the Central Bank.

That movement determined the market injection of US $ 746.1 million, which amounted to approximately US $ 1,235 million released through the daily Liquidity Letters auction for 7 days (Leliq), with only banks participating, the monetary authority extended the monetary base by almost US $ 2 billion, a minimum level compared to a primary offer of just over US $ 1.3 billion.

Hence the effect on the reference market interest rate has been minimal, only a reduction of 32 basis points, from 58.782% to 58.459% per annum to 7 days of terms.

Since the beginning of the ultra-restrictive monetary policy, in which the Central canceled Lebac's issuance and focused on Leliq, the net absorption of these instruments was US $ 58,422 million and also reduced the interest rate of 6.5 percentage points, from an initial increase of 5 points, from 60% to 65% per annum, and peaking at 73.52% per year on October 8, for an average daily minimum of 58.46 % annual In all cases, 7 days in advance.

The way of the cost of money

From then on, and before the costs that for families and also for the companies represents an interest rate of monetary regulation equivalent to 4.9% per month; As for the export sector, the low nominal price of the dollar, to which it rises, should subtract US $ 4 per dollar in the case of agricultural products and US $ 3 to the industrial sector, and a limit of US $ 4 per dollar has also recently been set. exporters of high-tech services, there are many analysts who ask Why the Central Bank does not accelerate the reduction of Leliq rates.

It looks like 5 answers are tested:

1 BCRA sources emphasize: "The caution in the intervention policy for the purchase of currencies will be maintained as in the reduction of the Leliq rate because there is a basic expansion target and the rate is what the market asks to absorb the weights. It can be reduced, but little by little. "

2 The Central Bank knows very well that there is a high seasonality of foreign currency supply on the part of the agricultural exporter that began in December with the first lots selling wheat, and will extend until July, with the corn and soybean harvest, while in the second semester the demand of the importers picks, above all, Yes, as expected, the industrial activity begins to be reactivated. Hence you do not want to encourage lower rates now, and you have to send them later, maintain the volatility in the foreign exchange market under control.

3 The first weeks of January are characterized by decline in turnover in the wholesale foreign exchange market, due to the seasonality of the manufacturing activity, but since February, and especially since March, when the campaigns for PASO are launched aggressively, before the October presidential elections, together with the With the start of the elections in several municipal and provincial districts, the tendency to dollarize portfolios could be awakened.

4 The rate of inflation began to decline, after the monthly peak that was recorded in September, but already in December, and the economists' forecasts for January, indicate that the pace has been attenuated after the tariff increases announced by the Government between the last days of December and the first week of January, which is estimated moderately attenuated in its effects due to the drop in gasoline prices; even more so as the price of oil in the world began to rise.

5. The international market has been singularly volatile since the last weeks of December and which also leads the Monetary Policy Committee of the Central Bank to maintain a cautious stance on the policy of reducing high interest rates, despite the side effects it has on the borrower, production and productive investment.


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