In agreement stand with the IMF, it was decided that benchmark interest rates they were not going to lose 60% until a fall in inflation expectations has been recorded, according to a survey of market expected duration (REM) for two consecutive months.
But still in November central bank followed by a gradual decrease in the rates of liquid promissory notes (LELIQ), what reduction of 11.3 percentage points to 73.5% of October 8 last year, and 62.2% have already surveyed the limit that is expected to reach only the end of the year,
Such high yields have triple effect: contractile for the economy real moderator inflation and exchange rate stabilizer,
In addition to overcoming the highest inflation in the last 27 years, the monetary unit was committed to do not increase the monetary base (working capital, cancellation of checks and deposits on the current account) through daily auctions LELIQ.
It is clear that the data Inflation in October does not allow the weakening of the Central Bank monetary value that needs to be activated. However, the reduction in rates that presides Guido Sandleris concrete in November before dollar value which fits in expected buoyancy bandsis a positive indicator perhaps first step towards recession recovery which began with an exchange rate that began on April 25th.
In this sense, the subject explained that “in the context in which the exchange rate remained close to the floor from the zone of non-interference, during the first half of November, the average interest rate LELIQ reinforced the downward trend.".
Lucas Gardiner, director of Personal Inversiones (PPI) Portfolio, confirmed that “in the remainder of this year and in the first quarter of 2019, resist a strong recession in the economic aspect, while a significant part of the party, which will determine the success or failure of the monetary and exchange scheme introduced since October, will be “played”.
“It will be measured mainly by the behavior of the exchange rate, inflation and interest rates. Today, in all three – and although the conclusion is premature – we can point to certain positive signs“, Summed up the PPI expert.
Report on Know how to invest He stressed that “in this delicate moment we have dollar and interest rates together that are rarely met in the history of argentina. And this happens in context with inflation down, ”after a peak of 6.5% every month in September.
In search of lost growth
After the exchange rate of 2018, which led to a request for financial assistance from the IMF, the Central Bank a delicate balance between interest rates and exchange ratesto avoid more significant deterioration in economic performance.
From October 1, the monetary unit identified a new strategy with non-interference zone for dollar fluctuations, debt issuance (LELIQ) should only be filed by banks, with rates 20 points higher than inflation and an obligation to freeze the amount of money in the economy.
Following the fragile policy of the BCRA, which led to collapse of over-indebtedness, the yield of reserves and the dollar initiated, Guido Sandleris He began to limit the currency collapse to realistic targets.
"Although it is part of high nominal interest ratesthat affect the financial intermediation process is expected to decrease as a result decrease in inflation expectations"Said the BCRA.
And he expected " most competitive real exchange rate will allow stimulate the traded sector and will help, along with correcting the budget deficit, eliminate the current account imbalance. Expected that economic activity begins a gradual recovery from 2019, on a more sustainable basis than in the past, which allowed us to resume the expansive phase of the financial cycle. "
The monetary base is “frozen” and debt is growing
Starting in October, the Central Bank adopted a new monetary policy. "Strict control" of monetary aggregatess, and assumed the obligations of the IMF Do not increase until June by 2019, the level of the monetary base in relation to the average monthly value of September.
Sandleris sought to maintain "zero monetary expansion", which in the face of inflation means real reductionwhen the growth of money circulating in the economy grew monthly by 2.2%.
Cumulative average Monetary base economies have reached 1 230 000 000 (1.23 trillion pesos) in the first half of November, about 28 billion pesos below the level recorded in the same period of October.
One of the issues discussed by analysts is increase in debt of a monetary unitwhich in previous months was the main reason for the growth of the dollar and inflation acceleration, which led the country to a recession.
One of the differences is that the LEBACK stock has exceeded the Monetary Base itself (currency in circulation, checks for current accounts and deposit accounts) and the volume of international reserves, measured in pesos,
Today, LEBAC plus LELIQ remains have been reduced to the third part is measured in dollars and 30% in pesos (similar to falling stocks), although it is still significant and frank promotion on "supercentes" in pesos.
The devaluation of the 2018 peso "wiped out" the stocks of these debt securities issued by the company, which went from the presentation of $ 64 billion. US in January to $ 20 billion. USA currently.
According to the calculations of the economist Ramiro Castiñira, Econometric, the reduction in reserves is due to the devaluation, which burns $ 30 billion, and also by selling reserves in the foreign exchange market for just over $ 14 billion.