Friday, December 09, 2022

August inflation closed with an alarming figure and the government would respond with a new rate hike

The report, which was circulated among economic team officials after noon on Wednesday, cleared some of the doubts that still lingered among economists: August inflation closes at around 7% above initial estimates made in cabinet,

The most worrying thing is that food category As per information handled by the officials themselves, August would have ended with above-average growth. he is Food inflation above 7%Always according to the monitoring of “high frequency” prices that follow in the economic team.

With these records, Miguel Paes will decide together with the rest of the Central Bank’s board of directors. new interest rate hike,

“The decision is to maintain positive rates above inflation,” a source in Sergio Massa’s team told iProfessional.

When will the fixed term rate increase?

The final adjustment of interest rates left the return on fixed terms at 5.8 percent per month. Clearly behind the 7% that August inflation will leave, if the official assessment is met.

It is not expected that there will be an adjustment in the cost of money at the BCRA board meeting this afternoon. Key next Wednesday 14 . to beWhen INDEC discloses CPI for August.

Given the high inflation, the Central Bank may continue to raise rates.

Prices and reopening of joint ventures

If inflation of 7% for August is confirmed, the accumulated inflation in the eight months of this 2022 would already be 56.4%., Very close to the wage guidelines signed by major unions in the country for the entire year.

For this reason, most of them now bid for reopen the talks, Some guilds have already achieved this, such as UOM and Commerce. They were able to anticipate the growth they had planned for the coming months.

The question from now is whether the government will be able to reopen all negotiations – something that the CGT demands – or if it goes on to award a certain amount of bonus (the possibility of $30,000 mentioned), as that requested Kirchnerism.

Inflation complicates the wart

With the weakening of the dollar to Central Bank reserves, inflation acceleration Badal Massa’s plans.

One issue is intertwined with another: the Central Bank cannot amass the dollar, but it cannot rapidly devalue the peso—to entice exporters to liquidate their foreign currency—as it further exacerbates the dynamic inflationary process. Will speed it up too.

In this regard, there is an open negotiation with grain companies to enable them to make a special arrangement for a month so that they can receive $200 for each dollar at the Central Bank window.

The jump in prices has alerted the economic team.

A settlement for the dollar is imperative

The shortage of foreign exchange further worsens the price situation. without being sure of the dollar price at which they will replenish their inputs or products, Companies have no choice but to comment “just in case”,

They do not know the replacement value of the goods they sell. And that’s why they prefer to accumulate stock rather than sell. Or they directly impose higher margins on their goods to protect themselves from devaluation.

monetary squeeze in sight

Since taking office a month ago, Massa has accelerated the trend of increasing interest rates. You want the cost of money to be above inflation.

In two weeks, the BCRA increased the reference rate by about 20 points. The last adjustment took place in mid-August. The Leliq rate went up to a nominal annualized 69.5%, which put the annual effective rate at 96.8%. In return, the return on fixed terms became 5.8% per month.

It is clear that if any Inflation close to 7% in AugustThese indicators must have become out of date and a correction would be necessary,

Inflation in August, led by food, was also pushed by other commodities, such as a 40% increase in public transportation and mobile telephony (some companies increased their membership by 19%).

Prices: August would have ended with above average food inflation.

Inflation: Bad beginning of September

As already posted by iProfesional, Major food manufacturing companies send new price lists to their customers, supermarket chains and wholesalers with strong growth,

The average rises from 7% to 8%, giving an idea of ​​the inflationary temperatures expected next month.

The basic food basket includes growth in practically all products: noodles, rice, sugar, flour, oil, dairy products and canned vegetables. As well as non-alcoholic beverages.

In theory, major companies have no additional large-scale markup plans, beyond some punctual corrections that arise in the middle of the month in some sensitive commodities—such as oil or coffee—that are expected to rise globally. But prices are linked to the position. ,

This First Adjustment to the Price List Keeps You A new floor for food cost inflation next month, In order to have a comprehensive picture, it will be necessary to monitor the growth of other foods such as meat and dairy products on the family table.

This dynamic of continuous growth in food is Sergio Massa’s biggest concern. However, no measures have yet been announced by the Commerce Secretary, Mattias Tombolini.

Unlike previous attempts at commerce, Massa and his team distrust controls.

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