The Government has reduced the reference interest rate and, therefore, the forward interest rate, e The blue dollar was under $1,000 in what constitutes another part of the president’s bet Javier Milei continue to liquefy what is known as the “mountain of pesos” generated in Central Bank debt.
The third reduction in the interest rate by the Minister of Economy, Luis Caputo, In his current administration he ratifies the objective of reducing the impact of the interest paid on the Central Bank’s debt on the expansion of the money supply. In other words, tries to take fuel away from inflation.
The Central Bank’s key rate had fallen twice from 11% per month to 8.6% and then to 6.8% and now it drops from 80% to 70% per year, i.e. to 5.8% per month.
In all cases, the monetary policy reference rate clearly operates below inflation with the stated objective of liquidate the Central’s liabilities which, measured in dollars, are around 36 billion dollarsbelow those of the Treasury which stand at 45 billion dollars.
In the market logic of the past, a negative interest rate in real terms corresponded to an increase in upward pressure on the free dollar, which has been absent in recent months.
There is, at least, three elements who come together to consolidate the idea of operators who are betting on calm exchange rates.
Milei seemed more convinced than ever in these last few weeks about maintenance the official dollar increase by 2% monthlythus excluding the possibility of an increase in the exchange rate.
Add to that the monetary contraction between December and March was ferociousmarking a decline in the monetary base close to 35% which corresponds, in turn, to the presidential idea to address “biggest adjustment in 30 years.”
And the third element focuses on the fact that the Central Bank continued to buy dollars accumulates just over 13,000 million dollars since the beginning of the Caputo administration.
These three arguments are based on the exchange rate framework it prevents us from actually knowing what the true price of the dollar is in a unified foreign exchange market which, one assumes, is the direction the government is heading.
The fact that the official wholesale dollar of 867 dollars is updated at 2% condemns it to lose in the face of inflation and fuels the discussion on the possibility that the exchange rate is heading, once again in contemporary Argentine history, towards a situation of backwardness which accentuates all the advantages and disadvantages.
Martín Rapetti, director of Equilibra, supports in Economic Clarion that, after the increase in rates and the impact they generate on the indices, “at the end of June we would have an exchange rate equivalent to $725 at today’s prices“, which is 16% lower than today’s wholesale dollar.
For the government, one of the main risks of the dollar slowing is that the dollar will collapse export clearance of the heavy harvest, but it is evident that today the research stabilize prices after the target that the increase in the cost of living index will be by single digits monthly starting in April.
That’s the scheme inflation beats the term deposit rate (today they offer 4.75% monthly) and that this beats the dollar reduces the paths to be taken by savers.
With a monthly fee of 4.75% on fixed terms, Any jump in the blue dollar can leave retail savings out of place in which, however, they have no place Fixed-term UVA with a duration of 180 days (adjusted for inflation) that banks limit claiming that they have a quota for those deposits that is covered quickly.
For families, savings that were previously channeled into the precautionary purchase of dollars are now allocated to this pay the increases of food, private schools, prepaid and the increases in the electricity bill are starting to arrive which will be crowned in the coming months with those of gas.
The composition of household spending has changed dramatically in the last 90 days in an economy where the dollar continues to reign and the decline in consumption does not yet seem to have reached bottom, in this context the stability of the blue dollar appears as a possible consequence.
The signs, once again, will have to be looked for in politics and in the future of the new omnibus bill that the government hopes will be approved by Congress.
Source: Clarin
