Stay Sergio Massa silent since inflation hit a new record in February. The data released on Tuesday led to meetings at the Economy Ministry with Deputy Minister Gabriel Rubinstein and Commerce Secretary Matías Tombolini. There are also contacts with the Central Bank, whose directory will define today whether to raise the interest rate, as the first measure in response to last month’s 6.6% inflation. StIt would be the first concrete action that will be taken to find a way to break the upward trend of the CPI.
In the corridors of the monetary agency there are rumors that the authorities could raise the monetary policy rate from the current 75% to 80% nominal per annum.l after six months no change, which would imply a monthly 6.6%. Today the nominal annual fixed-term rate is 75%, slightly below inflation. But close to the economics team believe a change is not warranted: “Without the increase in meat, inflation would have been below 6%, hard for them to want to increase it.”
The reading is similar to some explanations that Massa’s team manages. In the despatches they state that the increase was due to the impact of drought on the beef market, the heat wave and the renewal of price agreements in February with authorized increases of 9%, well above the average ceiling of 3.2%. Also – they argue – for the monetary issue and the “leak” on parallel dollars, a gap that leads companies to cover themselves.
In this context, close to the minister assure that “we will continue work on fiscal and monetary policies consistent with much lower rates of inflation. Given that food has tripled the Fair Prices Program guideline, one of the unknowns is whether there will be new income-relieving bonuses. The idea is to continue with “income policies”, such as agreements with companies (fair prices) and other measures, not yet specified.
After the IMF statement in which the authorities promised to keep rates above inflation, the market is waiting for the head of the BCRA, Miguel Pesce, to move his pieces in that direction. In February, the entity’s central argument for freezing this variable was that core inflation stood at 5.5%, a similar level to December. Now, that long-term index rose 7.7% last month.
Nor is it clear whether the BCRA will accelerate the rise of the official dollar, today at $202, after falling below its January and February prices. “The need to avoid a spike in inflation does not only respond to an attempt to recover some ‘political capital’ in view of the elections, but rather to the fact that an inflationary acceleration generates greater pressures to accelerate the crawling peg and raise interest rates, returning more unstable to the stage”, reads an article by Ecolatina.
In any case, the economics team knows that there are some inflation points underfoot and they may start to be released sooner rather than later. By chance, the tariffs of public services. The IMF has in fact requested that, by May, the removal of subsidies for services currently consumed by families with better incomes be accelerated.
However, it is not clear whether the Commerce secretary will continue with the extension of the price agreements, which have not produced many results so far.
The latest INDEC data say, for example, that the food sub-index has risen exactly three times (9.6%) compared to the 3.2% increase negotiated between the government and companies that have joined the Fair Prices program .
For the moment, for the month of March the first measurements – partial, of course – of private consultancies are starting to give signals that the CPI this month could be even higher than the 6.6% of January.
Source: Clarin
