As the market expected,
the Central Bank decided this Thursday to undertake the second consecutive cut in the
economy's reference rate. The monetary authority lowered it by 10 percentage points,
from 80% to 70% annually.
The move is similar to the one the organization faced last month: to favor
the Treasury tender that is scheduled for this Thursday
, the organization surprised the market in mid-wheel with a cut of 1,000 basis points in the yield of the repos.
However,
this is not an isolated decision.
The entity chaired by Santiago Bausili faced
other flexibilities and modifications on the exchange front.
As explained by the monetary authority in a statement, the measures are justified because "since December 10, 2023, the economic situation presents
sustained signs of reduction in macroeconomic uncertainty
."
In addition to the reduction in rates, the organization decided to
make access to the Free Exchange Market more flexible for MSMEs
; Also, access to the MULC for advances on capital goods for MSMEs. At the same time, the organization announced the normalization of liquidity management
through reserve requirements
and the
deactivation of the swap with the Bank for International Settlements
(BIS).
To make these decisions, Bausili and the Central directors relied on what they called
"monetary balance factors and exchange rate balance factors
. "
Among the first, the reduction of the inflationary escalation stood out.
"After the initial correction of relative prices in December 2023,
a pronounced slowdown in inflation is observed
, despite the strong statistical drag that inflation carries in its monthly averages. The more frequent price surveys have been useful to appreciate the monthly dynamics end to end," stated the BCRA.
He also considered
"the moderation, in real terms, of the monetary issue and the consequent improvement of the Central Bank's balance sheet.
Since December 10, the monetary base and the broad monetary base (including liabilities remunerated in pesos) have been reduced to a rate of 10.5% and 5.8% average per month, respectively, in real terms."
In that sense, he highlighted that "the monetary anchor" contributed to the inflationary slowdown once two large accumulated macro imbalances were resolved: on the one hand, "the monetization coming from the fiscal deficit," which was corrected by the strong adjustment in spending that promoted by the Government from the second half of December and then by the oversupply of pesos and the depressed demand for dollars by the importing sector, which was absorbed by the BOPREAL placements.
Regarding the "exchange balance" situation, the organization highlighted the
recomposition of international reserves
: although
the goal of positive net reserves has not yet been reached,
the Central Bank reported that
it managed to accumulate US$8.7 billion since December 10
. At the same time, he highlighted "the stability of the gap between the official price of the dollar and the parallel quotes and the downward correction in the price of future dollar contracts on the official exchange rate."
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