Far from stabilizing, inflation in March played maximums reaching 6.7% monthly. It is not only the highest data of Alberto Fernández's government, but it is the highest record since the 2002 crisis. The accumulated inflation was 16.1% in the first quarter of the year and in March 2021 was 55.5%.
Disaggling the index, we observe that education is the leader in increases, launching a 23.6%, since it is explained by statehood. Unfortunately, it is repeated again that food and beverages mark 7.2% increase, being above the general level. The food aft is explained (in part) by the impact of rising raw materials prices on the war between Ukraine and Russia on 24 February. In any case, the strong acceleration is the result of the irresponsible fiscal and monetary policy of the last part of 2021 which, with the intention of improving its permormance in the middle-term elections, the government chose to fall into fiscal dominance.
Current management inflation accumulates 146,87% and do not find real solutions to inflationary dynamics. What the government proposes are always the same and the results we have in view: maximum prices, supply law, retentions to the agro-exporting sector which, far from descending, continues to rise.
The government ran out of nominal anchors. The daily devaluation that came leading the BCRA was significantly changed and now seems to accommodate in values much more in tune with price variation. This is mainly because, after the agreement with the IMF, the body has requested that the exchange rate move towards inflation not to appreciate the real exchange rate and not lose competitiveness. The acceleration of crawling peg was more than necessary, since a constant appreciation of the TCR returns to the uncompetitive country, favoring exports and reducing imports, generating strangulations in the current account.
April and May are months of exchange settlement of the agri-exporter sector and relieves the accumulation of reserves of the Central Bank. However, the highest exchange rate the exchange rate difference between the official dollar and the financials generates an advance of imports and export settlement delays, causing problems in reserves (in addition to jeopardizing targets with the IMF).
What does the market see?
Along with the acceleration of the crawling peg, the curve of futures moved upwards over previous months, leading to levels very close to 60% (TNA) and following the line of the linked dollar curve (which went from positive to negative), priced higher levels of expected devaluation. In this sense, last Tuesday, the government offered to swap the TV22 bonus that wins in the end of month, in exchange for a basket of 20% TV23 (dollar linked 2023) and 80% TV24 (dollar linked 2024), being a good cover alternative would change against the increase of the peg crawling.As the budget of the financial dollars remained stable in recent weeks and seem to have accelerated inflation, which we could see more demand in the coming days.
The liquidation account closed in 190.53 and the mep in 191,33 (both quotes referring to the global 2030). Here we see that the CCL/MEP exchange is negative, something that has been seen throughout the week. This means that an investor can donate and change their local dollars for dollars abroad for a negative fee. We do not believe that this remains so for a long time because it is a disincentive to the entry of international flows which, of all, ways we do not believe that they appear, at least in the short term.
With regard to the CER obligations, they continue to be very much sought. The short part of the curve and the lecers (adjustable letters by CER) yield negatives having to go up to 2024 to find positive yields. We highlight the T2X4 (CER + 1.7%) and TX26 (CER + 2.9%).
Finally, after the closure of the market, BCRA decided to increase the reference interest rate (LELIQS) 250 bps leading it from 44.5% to 47% (TEA 58.7%). The body's statement also mentions that, in order to transmit the effect to the rest of the placements, the minimum limits of the PF rates are raised: For human people 46% to 30 days up to ten million and for the rest of 44% placements.
The Central Bank reacts to inflation with the above-mentioned rates and the speed of devaluation, but it can be introduced into a very dangerous dynamic. A higher rate of impact devaluation on prices via (pass through) and inflation feedback. The rate rise takes economic activity by increasing credit. Both combined factors can be very dangerous for the economy that has been creating very good levels of recovery.
It seems that the only inflationary anchor left to the government is to meet the goals of the IMF agreement every quarter, which will not be easy by the LNG’s incarceration that directly impacts the accumulation of Central Bank RRII and the fiscal goal.
Sources: Bloomberg, Indec, Bonistas. with
Comments