The 6% inflation in April ended up forcing a new rate hike. Despite the fact that until last week there were doubts as to whether the Central Bank (BCRA) would validate a new increase, the hard price advance data reported this Thursday by the Indec left the entity chaired by Miguel Pesce no choice but to validate another increase in the monetary policy rate.
The Board of Directors of the BCRA decided to raise the reference rate by 200 basis points to take it to 49% of TNA. It was the fifth increase of the year, one for each month, and in this way the performance of the Leliq accumulated an advance of 11 percentage points in 2022. The Annual Effective Rate (TEA), meanwhile, reached 61.8% .
Together with this new rate decision, the Central also determined new increases for fixed term rates. For deposits from individuals for up to $10 million, it set a floor of TNA 48% and a TEA of 60.1%. For all other deposits, the rate was set at 46%, leaving the TEA at 57.1%.
Analysts agree that this new rise in the monetary policy rate would darken the expected average inflation until the end of the year. “Assuming that inflation reaches 70%, which would imply an inflation of 4% per month, the effective monthly rate of that 61.8% of TEA practically equalizes inflation because it remains at approximately 4% or 4.1%”, explains Sebastián Menescaldi, director of Eco Go.
“But I think that this rate increase is aimed at maintaining the stability of the demand for pesos rather than lowering inflation. That is, it is going to equalize it but it does not generate disinflation. And we will have to see now what happens with the exchange rate , if they dare to run a little faster,” he added.
Similar analysis provides Federico Furiase, director of Anker Latin America. “This new rise in the effective rate is matched by the crawling of the official exchange rate, which has been running at an average monthly rate of 4%”, he indicates. And he adds: “The point here is that what cannot happen is that the rate runs behind the rate of devaluation because if it does not generate a bottleneck at the exchange level, which would complicate the settlement and encourage imports and the BCRA does not recover reserves “.
The uncertainty that existed regarding this new rate hike was explained not only by its impact on the level of activity, but also by the increase in the quasi-fiscal cost at a time when Leliq’s stock already exceeded $5 billion. It is that according to estimates, for each increase of 100 basic points of the rate, the weight of the interests paid by the Leliq increases by 0.1 points of GDP. This becomes relevant considering that for this year a floor of $2.3 trillion is already foreseen, a figure that would be equivalent to 3 points of the product.
To this must be added that in April the Treasury obtained a rollover ratio of 90%, the lowest since August 2021, which led analysts to speculate that, more than the BCRA, the improvement in rates must come from the Ministry Finance.
However, since the beginning of this week the BCRA accelerated the official rate of devaluation again, after the crawling peg showed a more moderate pace during the first rounds of the month. That led the market to start speculating on this new increase in the reference rate that was finally validated this Thursday, hours after the Indec revealed that the accumulated inflation in 12 months climbed to 58%, a record in 30 years.