------------------ ESP

The BCRA Keeps its Monetary Policy Interest Rate at 27.25%

Buenos Aires, April 24th, 2018. On April 12th, the National Institute of Statistics and Censuses (INDEC) published the Consumer Price Index (IPC). The price change in March was 2.3% (headline inflation) and 2.6% (core component). The year-on-year inflation rate thus remained at 25.4%, whereas its core component amounted to 22.4%. Broken down by region, March’s inflation rate ranged from 1.9% in the Pampas to 3.1% in Patagonia and the Northwest.

March’s inflation data under the System of Wholesale Prices have also been released in the past two weeks. Price changes ranged from 1.9% to 2.4% vis-à-vis February. The year-on-year increases in wholesale prices ranged from 27.5%— Domestic Wholesale Price Index (IPIM)—to 29.9%—Producer Basic Price Index (IPP).

The estimates and high-frequency indicators from public and private sources monitored by the BCRA show that April’s core inflation will remain high, though below the level recorded in March. As stated in previous releases, the BCRA holds that the signs of inflation acceleration in the past few months are temporary and result from a sharp increase in regulated prices and a rapid depreciation of the peso between December and February. In the BCRA’s view, inflation will consolidate its downward trend once these temporary factors have disappeared. This favorable outlook is supported by four reasons. Monetary policy is tighter than most of 2017. Wage negotiations are being closed in a manner consistent with the 15% target. The rise in regulated prices will evidence a strong slowdown after April. Finally, no significant depreciation of the currency is expected for the next few months, bearing in mind the relatively high real exchange rate and the measures adopted by the BCRA.

The BCRA's intervention in the market continued in order to preserve the value of its home currency, with the conviction that a higher depreciation than that already occurred would not be justified either by actual economic impacts or the developments of the planned monetary policy: Hence, if depreciation were not stopped, the disinflation process would be slowed down. Although the market’s expectations show that monetary policy seemed to have loosened in the past few months, there is still prospect of a less tight bias than that planned by the monetary authority for the coming months.

But foreign exchange intervention is a measure that supplements monetary policy; it is not meant to be a substitute. The BCRA holds that the current bias of monetary policy is appropriate in a baseline scenario where inflation goes down to the desired level, once the effect of temporary factors have disappeared. According to the BCRA’s forecasts, inflation will drop in May, and a downward trend is expected to consolidate in the following months. As announced at the presentation of the Monetary Policy Report last April 16th, the BCRA is going to analyze the evolution of inflation in the coming weeks. Should deceleration be lower than expected, the BCRA will raise the monetary policy rate.

Based on all the available information, the institution has decided to keep its monetary policy rate at 27.25%, the center of the 7-day repo corridor.

The BCRA's monetary policy will be aimed at reaching its intermediate inflation target of 15% in 2018.

Price Monitor

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

% m.

% y.o.y.

% m.

% y.o.y.

% m.

% y.o.y.

% m.

% y.o.y.

% m.

% y.o.y.

% m.

% y.o.y.

National IPC

1.5

22.7*

1.4

22.4*

3.1

24.8

1.8

25.0

2.4

25.4

2.3

25.4

Core National IPC

1.3

21.7*

1.3

21.2*

1.7

21.1

1.5

21.1

2.1

21.6

2.6

22.4

IPC for Greater Buenos Aires

1.3

22.9

1.2

22.3

3.4

25.0

1.6

25.4

2.6

25.5

2.5

25.6

Core IPC for Greater Buenos Aires

1.1

22.0

1.3

21.5

2.0

21.8

1.5

21.9

2.2

22.3

2.5

23.1

IPC for the City of Buenos Aires

1.5

24.5

1.3

23.6

3.3

26.1

1.6

25.8

2.6

26.3

2.1

25.4

Core IPC for the City of Buenos Aires

1.4

23.6

1.3

23.2

1.6

23.5

1.7

23.1

2.1

23.7

2.4

23.2

IPC for San Luis

1.6

21.6

1.5

21.8

3.0

24.3

1.4

24.6

2.5

25.6

2.8

25.2

IPC for Córdoba

1.2

22.9

2.1

24.0

3.1

25.5

2.3

26.6

2.5

26.8

1.7

24.8

Core IPC for Córdoba

1.0

20.5

1.2

20.4

1.4

20.4

1.6

20.3

2.0

21.2

2.2

20.8

IPIM

1.5

17.3

1.5

17.7

1.6

18.8

4.6

22.4

4.8

26.3

1.9

27.5

IPIB

1.4

16.5

1.4

17.2

1.7

18.2

4.9

22.0

5.2

26.7

2.4

28.9

IPP

1.6

16.3

1.4

16.8

1.8

17.9

5.0

21.7

5.6

27.1

2.4

29.9

ICC

0.8

26.8

0.5

25.5

1.4

26.4

1.1

24.5

2.3

25.2

1.5

25.8

ICC - Materials

1.6

22.1

1.5

21.6

1.6

21.9

2.4

22.6

2.8

23.9

2.5

24.7

ICC - Labor

0.4

28.3

-0.2

26.6

0.2

26.3

0.2

22.4

1.6

24.1

1.0

25.4

REM National IPC - 2018

16.0

16.6

17.4

19.4

19.9

20.3

REM National Core IPC - 2018

14.3

14.9

14.9

16.9

17.1

18.1

REM National IPC - 2019

11.0

11.3

11.6

13.5

14.0

14.3

REM National Core IPC - 2019

10.4

10.4

10.0

12.0

12.6

12.6

REM National IPC - 12 months

17.3

17.5

17.4

18.6

17.6

17.8

REM National Core IPC - 12 months

15.1

15.3

14.9

16.5

16.1

16.0

* As for the National IPC, the year-on-year changes are calculated on a combination of the IPC for Greater Buenos Aires until and including December 2016 and the IPC from January 2017.

Compartilo en Facebook   Compartilo en Twitter    Compartilo en Linkedin    Compartilo en WhatsApp