They expect the inflation-squeezed BCRA to raise the rate again

Under the pressure of high levels of inflation and the extra emission generated by the soybean dollar, The central bank would raise the economy’s benchmark rate this Thursday. In August, the monetary authority was faced with a very aggressive rise of 950 basis points and now the market expects the cost of borrowing to adjust again between 350 and 500 basis points.

So, the effective annual rate of Leliq would exceed 100%above the inflation projection for this year made by market agents in the latest forecast survey compiled by the BCRA, which produced an average forecast of 95% per annum.

The market is betting that Thursday’s central bank board meeting will tackle the eighth rate adjustment of the year, though they warn that this increase hits hard on the organization’s remunerated liabilities and that, as an isolated strategy, it will not be effective. reverse the price increase in the economy.

“We expect a rate hike of around 400 basis points. The August data is worrying, but inflation will not slow down just with a rate hike. Therefore, if they are unwilling to correct relative prices, including the type of change. , so the rate increase only increases the issuance of pesos for interest on remunerated liabilities“, underlined EcoGo economist Lucio Garay Méndez.

For Martín Polo, of Cohen, “The BCRA has some urgency to raise the rate because when it adjusted last month it said it has seen inflation go down and with that level of rates, inflation hasn’t gone down at all. indeed 7% is a wrong figure “.

For his part, Juan Pablo Albornoz, from Invecq, said that although core inflation has shown some slowdown, a rate hike is above all a signal for the market. “Not giving another strong signal on rates, despite the quasi-fiscal cost, would eliminate any slight incentive for placements in pesos and overheat the” calm “of exchange rates in recent weeks”.

Offering yields in pesos above inflation is one of the points agreed with the Monetary Fund. Regardless of whether this target can be achieved, what worries analysts is that the Leliq rate will be out of phase with the daily devaluation rate.

During the first half of this month, the body chaired by Miguel Pesce raised crawling pegs to an average of 6.5% per month, in order to “draw” with predicted inflation. This implies a nominal annual rate of increase of the dollar of 78% and an effective rate close to 113%.

Gabriel Caamaño Gomez, of Consultora Ledesma, said: “I hope that if they don’t raise the rate, they lower the devaluation rate or otherwise raise the rate to put it in line. The nominal run ends badly.”

The third reason analysts see for a substantial rate hike is the huge monetary issuance that was generated in the first 10 days of operation of the “soybean dollar”. In these first few wheels alone, the body issued $ 393.932 million.

“If you take the net issue, it is 9% of the August monetary base, which had already been impacted by the issues that had to be made in June and July due to the stress of the pesos debt. In short, it is expensive for IT the central bank accumulates reserves and also has to pay more rates so that those pesos don’t hang around in the economy, “said Pablo Repetto, of Aurum Valores.