Specifically, BCRA increased the LELIQ rate (monetary policy) from 60% of TNA to 69.5% (from 79.8% to 96.8% of TEA), in the same way it increased the one-day pass rate from 55% to 64.9% (73.2). done. % to 90.5% TEA). This sudden adjustment of rates resulted in higher remuneration for deposits in the financial system, The fixed-term rate for human individuals jumped 850 bps and is now remunerated at 61% (TEA from 81.3% to 96.6%) at a TNA of 69.5%. For its part, BADLAR saw a small increase of 700 bps, from 54% to 61% (TEA from 69.6% to 81.3%).
Which one is that Logic Behind this growth?
High frequency data for the first week of August showed that, far from slowing down, Inflation picks up, more than 9% monthly and even private surveys showed that it was more than 3% weekly or 13.5% monthly (it is not advisable to do so as it is the greatest seasonality within the month). Perhaps, the monetary authority was beginning to feel that inflationary dynamics were getting out of hand and it went well Maintaining the demand for money with the only tool in your hands: Better remuneration to depositors in pesos.
However, even after entering flamboyant, it remains to be seen whether this is enough to quell inflation expectations which were overwhelmed. It is worth remembering that analysts consulted by BCRA in July REM raised their annual inflation expectation for 2022 to no less than 14.2 percentage points (from 76% to 90.2%) and laid a floor on monthly inflation for the rest of the year. at 5%, up from 4.2%. Assuming that these analysts maintain their forecast of 6% per month for August, the one-month forward annualized real interest rate for the retail fixed term, despite the acceleration shown by higher frequency data increased from -11.5% to -2.3%, remains at the lowest negative level since November 2021, Meanwhile, the real rate of BADLAR goes from -13.9% to -9.9%.
While they are still negative returns, in Miguel Pace’s head they may resonate enough to dampen the rise in inflation expectations. It should not be overlooked that under this calculation, real interest rate for the depositor retail Just two weeks ago it was -22% p.a., This was (was) more than enough fuel to keep the momentum going speed of money circulation (decline in demand for money). In other words, there was no incentive to stay in the peso in the face of such negative remuneration, so agents fled from the peso to goods and dollars (accelerating inflation and rising CCL). Better late than never.
BCRA takes first step to counter spiraling inflationBut the fire could not be controlled. This violent rise in interest rates may not be the last. This will serve to deter the runaway of expectations, but not to satisfy them completely. If the inflation momentum anticipated by high-frequency surveys in August is confirmed, then expectations will once again be revised upwards, therefore Monetary authority will have no option but to raise the rate, The quote is correct but the magnitude may still be insufficient. The monetary authority will have to learn from the experience it has had in the last month and make a guess of the facts. You should stop “running it from behind” as they say in the market.
PPI Macroeconomics Team Leader.