Argentina's central bank kept its monetary policy stance steady and set the interest rate on 7-day liquidity paper, known as Leliq, as its new monetary policy rate at 40.0 percent, the same rate of its key rate since early May.
The Central Bank of the Argentine Republic (BCRA), which has raised its policy rates three times by 12.75 percentage points since April 27 in an effort to shore up the peso's exchange rate, also reiterated its guidance that it will maintain the contractionary bias of monetary policy until the trajectory of inflation and expected inflation is aligned with the 2019 target.
BCRA's board said the reason for maintaining the rate was that inflation in June had accelerated more than expected, mainly due to the temporary impact of peso depreciation in May and June. And while inflation is forecast to decelerate in July, this will be less than expected.
The baseline forecast is for core inflation to decline in August, September and October from a record in July while headline inflation is expected to show a smaller decline due to higher regulated prices in August and October.
Despite the expected decline in inflation in coming months from July, the central bank said it recognizes that a longer period of financial stability will be required to reduce the risk of a greater than expected transfer of the exchange rate to retail prices.
Argentina's national headline inflation rate rose to 29.5 percent in June from 26.3 percent in May while core inflation rose to 26.9 percent from 23.6 percent.
After falling sharply in late April through June, the peso has been steady this month and was trading at 27.39 to the U.S. dollar today, down 32 percent this year.
In June the International Monetary Fund and Argentina agreed on a 3-year, $50 billion support package that included new inflation targets for BCRA and a new central bank law that will strengthen its operational and financial autonomy.
The new targets are for inflation below 22 percent for the second quarter of 2019 and for inflation of 17 percent for 2019. For 2020 an inflation target of 13 percent has been set and for 2021 a target of 9 percent. By 2022 BCRA is targeting 5 percent inflation, its estimate of price stability.
In a separate statement, BCRA also said it had set up a new monetary policy committee, Copom, composed of Luis Caputo, central bank's president, Vice President Gustavo Canonero, Director Enrique Szewach, who is appointed by the central bank's board, and on an interim basis, Mauro Alessandro, head of strategy and monetary policy communications.
On a permanent basis, the fourth member of Copom will be the deputy general manager of economic research.
In the event of a tied vote, President Caputo's vote will be deciding. In mid-June Caputo, a former finance minister, took over as BCRA president from Federico Sturzenegger.
The primary purpose of Copom will be to set BCRA's policy rates and conditions to execute the bank's monetary policy, including lowering the rate on the declining number of 35-day Lebac securities which functioned as a policy rate until January 2017 when BCRA began using the 7-day interbank lending rate as its reference rate.
In January this year Leliq securities were introduced to give BCRA an additional tools to mob up short-term excess liquidity.
From now on Copom will meet on the second Tuesday of each month to discuss the monetary policy rate and issue its decision at 5 p.m. local. On the third Tuesday of each month Copom will meet to determine how much to cut the Lebac rate.
The first meeting of the new Copom is Sept. 11.
www.CentralBankNews.info
Showing posts with label Central Bank of Argentina. Show all posts
Showing posts with label Central Bank of Argentina. Show all posts
Tuesday, August 7, 2018
Tuesday, May 8, 2018
Argentina maintains rate at 40% after 3 rapid-fire hikes
Argentina's central bank left its monetary policy rate at 40 percent after three sharp rate hikes in 12 days and said it expects to keep real interest rates at a significantly higher level than in the past as long as inflation remains above its forecast for this year and emerging markets are facing a scenario of greater instability.
The Central Bank of the Argentine Republic (BCRA) has raised its key rate by a massive 12.75 percentage points since April 27 in an effort to shore up the exchange rate of the peso and force down inflation that is far in excess of the government's target for 2018 of 15 percent.
After the latest 675 basis point rate hike on Friday, May 4, there were signs of peso stabilization but earlier today it continued to tumble until Argentina's president, Mauricio Macri, announced on television that his government was seeking a line of credit from the International Monetary Fund (IMF) to "avoid a crises like the ones we have faced before in our history."
Macri's decision to turn to the IMF will bring back memories for many Argentines who still blame the Washington D.C.-based institution for letting the country's debt soar and trigger the 2001 debt crises by allowing it keep an exchange rate that pegged the peso to the U.S. dollar.
Macri, who is facing election in October 2019, took office in December 2015 promising to end the country's isolation from international financial markets, tackle high government spending on subsidies, and lower the fiscal deficit and inflation.
Christine Lagarde, IMF managing director, welcomed Macri's statement and said discussions had been initiated with Argentina on how its economy could be strengthened and "these will be pursued in short order."
After spiking to 23.14 to the U.S. dollar, the peso ended today around 22.35 to the dollar, down 9.4 percent since April 26, the day before the first of three rate hikes. Compared with the start of this year the peso has lost 16.8 percent and compared with the start of 2017 it is down almost 30 percent.
In today's longer-than-usual statement, the central bank noted the recent instability in the currency market, saying the normal menu of options available to a central bank include allowing the currency to depreciate, carry out interventions to avoid a currency overreaction by investors and raising interest rates to moderate the inflationary impact.
BCRA noted its initial decision was to intervene in the foreign exchange market to contain the depreciation followed by letting the peso slide as it became convinced the pressure on the peso was not just an isolated episode but part of a deeper shock to emerging market currencies.
At the same time, the central bank raised its monetary policy rate by 1,275 basis points until it reached the current rate of 40 percent in three steps, starting on April 27, then May 3 and then May 4.
In addition, the central bank also widened the interest rate corridor to allow domestic assets to move more freely and was active in the secondary paper market.
Given the unusual situation and the use of exceptional tools, the central bank said it was appropriate to share its vision about the near future.
First, the BCRA confirmed that its monetary policy regime is based on interest rates with a floating exchange rate that absorbs external shocks, with interventions only in exceptional cases when the movements can be disruptive to the process of lower inflation.
Secondly, as the market stabilizes, the central bank will normalize its operations and return to a narrower corridor that allows the policy rate to be automatically transmitted to other interest rates.
Thirdly, with regard to the reference rate, the central bank considers that it will be necessary for the level of real interest rates to be significantly higher than before recent changes when inflation is above that forecast for 2018 and when there is a situation of greater instability in emerging markets.
The current bout of peso weakness and investor nervousness stems from Macri's decision on Dec. 28, 2017 to push back the goal of lowering inflation to 5 percent by one year to 2020 and raise the inflation target to 15 percent from a previous 8-12 percent.
On Jan. 9 and Jan. 23 the central bank then lowered its key rate in two steps by a total of 150 basis points, arguing the rise in inflation is transitory and it will continue its downward trend once the one-off impact of a higher in regulated prices dissipates.
But inflation is still rising and rose to 25.6 percent in March from 25.4 percent in February.
The Central Bank of the Argentine Republic (BCRA) has raised its key rate by a massive 12.75 percentage points since April 27 in an effort to shore up the exchange rate of the peso and force down inflation that is far in excess of the government's target for 2018 of 15 percent.
After the latest 675 basis point rate hike on Friday, May 4, there were signs of peso stabilization but earlier today it continued to tumble until Argentina's president, Mauricio Macri, announced on television that his government was seeking a line of credit from the International Monetary Fund (IMF) to "avoid a crises like the ones we have faced before in our history."
Macri's decision to turn to the IMF will bring back memories for many Argentines who still blame the Washington D.C.-based institution for letting the country's debt soar and trigger the 2001 debt crises by allowing it keep an exchange rate that pegged the peso to the U.S. dollar.
Macri, who is facing election in October 2019, took office in December 2015 promising to end the country's isolation from international financial markets, tackle high government spending on subsidies, and lower the fiscal deficit and inflation.
Christine Lagarde, IMF managing director, welcomed Macri's statement and said discussions had been initiated with Argentina on how its economy could be strengthened and "these will be pursued in short order."
After spiking to 23.14 to the U.S. dollar, the peso ended today around 22.35 to the dollar, down 9.4 percent since April 26, the day before the first of three rate hikes. Compared with the start of this year the peso has lost 16.8 percent and compared with the start of 2017 it is down almost 30 percent.
In today's longer-than-usual statement, the central bank noted the recent instability in the currency market, saying the normal menu of options available to a central bank include allowing the currency to depreciate, carry out interventions to avoid a currency overreaction by investors and raising interest rates to moderate the inflationary impact.
BCRA noted its initial decision was to intervene in the foreign exchange market to contain the depreciation followed by letting the peso slide as it became convinced the pressure on the peso was not just an isolated episode but part of a deeper shock to emerging market currencies.
At the same time, the central bank raised its monetary policy rate by 1,275 basis points until it reached the current rate of 40 percent in three steps, starting on April 27, then May 3 and then May 4.
In addition, the central bank also widened the interest rate corridor to allow domestic assets to move more freely and was active in the secondary paper market.
Given the unusual situation and the use of exceptional tools, the central bank said it was appropriate to share its vision about the near future.
First, the BCRA confirmed that its monetary policy regime is based on interest rates with a floating exchange rate that absorbs external shocks, with interventions only in exceptional cases when the movements can be disruptive to the process of lower inflation.
Secondly, as the market stabilizes, the central bank will normalize its operations and return to a narrower corridor that allows the policy rate to be automatically transmitted to other interest rates.
Thirdly, with regard to the reference rate, the central bank considers that it will be necessary for the level of real interest rates to be significantly higher than before recent changes when inflation is above that forecast for 2018 and when there is a situation of greater instability in emerging markets.
The current bout of peso weakness and investor nervousness stems from Macri's decision on Dec. 28, 2017 to push back the goal of lowering inflation to 5 percent by one year to 2020 and raise the inflation target to 15 percent from a previous 8-12 percent.
On Jan. 9 and Jan. 23 the central bank then lowered its key rate in two steps by a total of 150 basis points, arguing the rise in inflation is transitory and it will continue its downward trend once the one-off impact of a higher in regulated prices dissipates.
But inflation is still rising and rose to 25.6 percent in March from 25.4 percent in February.
Although the depreciation of the peso is likely to impact local prices, the central bank said many of its trading partners have also seen their currencies depreciate, moderating some of that impact.
The latest survey showed a rise in 2018 inflation expectations to 22 percent from 20.3 percent for headline inflation and to 19.8 percent from 18.1 percent for core inflation, BCRA said.
Saturday, May 5, 2018
Argentina raises rate another 675 bps to 40%, peso rises
Argentina's central bank raised its monetary policy rate by a massive 6.75 percentage points to 40.0 percent on Friday, its third rate hike in a week, in an effort to calm down what it described as "disruptive behavior in exchange markets" and guarantee that inflation will decelerate.
The Central Bank of Argentina (BCRA) has now raised its benchmark rate by 12.75 percentage points since last Friday, April 27, when it first began its tightening campaign by raising the rate by 300 basis points. This was followed by another 300-basis point hike on Thursday, May 3.
"The monetary authority made these decisions in order to avoid disruptive behavior in the exchange markets as well as to guarantee the disinflation process and is ready to act again if necessary," the BCRA said, adding:
"The Central Bank will continue using all the tools at its disposal and will conduct its monetary policy to reach its intermediate inflation target of 15% in 2018."
BCRA said the latest rate hike on Friday came in reaction to the peso's depreciation against other emerging market currencies and there were signs that this latest hike may help reverse the peso's recent downward trend.
The peso immediately jumped 3.7 percent after Friday's rate hike to 21.45 per U.S. dollar and later settled at 21.85 to the dollar. The first two rate hikes had failed to reverse the peso's fall.
But the peso is still 7.3 percent below its level on April 26, before the tightening began, and 14.9 percent below the level at the start of 2018, pushing up import prices and thus inflation.
In addition to raising its policy rate, the central bank also took other measures to restore calm to financial markets, and said it would continue to intervene in foreign exchange markets, with both cash and term transactions.
On Thursday the BCRA said it had sold another $451 million, the day after its sold about $500 million. In March and April the central bank had sold $6.77 billion, more than 10 percent of its reserves, according to Reuters.
It raised the ceiling of its 7-day active pass rate to 47 percent from 38.25 percent, the passive rate raised to 33.0 percent, and one-day rates were raised to 57 percent for active passes and 28.0 percent for the passive.
With effect on Monday, the net positive global position of foreign currency held by financial institutions may not exceed 10 percent of liquid equity
In parallel with the central bank's moves, the government of Mauricio Macri cut its target for the primary fiscal deficit this year to 2.7 percent of Gross Domestic Product from 3.2 percent and confirmed its commitment to the 15 percent inflation target.
The latest troubles to hit Argentina were triggered on Dec. 28, 2017 when Macri's government - which is facing an election in October 2019 - pushed back its goal of lowering inflation to 5 percent by one year to 2020 and raised the inflation target to 15 percent from a previous 8-12 percent.
On Jan. 9 and Jan. 23 the central bank then lowered its key rate in two steps by a total of 150 basis points, arguing the rise in inflation is transitory and will continue its downward trend once the one-off impact of a higher in regulated prices dissipates.
But inflation is still rising and rose to 25.6 percent in March from 25.4 percent in February.
Macri's government, which took office in 2015, has been slashing government subsidies to utilities and transportation in an effort to curb the fiscal deficit.
www.CentralBankNews.info
The Central Bank of Argentina (BCRA) has now raised its benchmark rate by 12.75 percentage points since last Friday, April 27, when it first began its tightening campaign by raising the rate by 300 basis points. This was followed by another 300-basis point hike on Thursday, May 3.
"The monetary authority made these decisions in order to avoid disruptive behavior in the exchange markets as well as to guarantee the disinflation process and is ready to act again if necessary," the BCRA said, adding:
"The Central Bank will continue using all the tools at its disposal and will conduct its monetary policy to reach its intermediate inflation target of 15% in 2018."
BCRA said the latest rate hike on Friday came in reaction to the peso's depreciation against other emerging market currencies and there were signs that this latest hike may help reverse the peso's recent downward trend.
The peso immediately jumped 3.7 percent after Friday's rate hike to 21.45 per U.S. dollar and later settled at 21.85 to the dollar. The first two rate hikes had failed to reverse the peso's fall.
But the peso is still 7.3 percent below its level on April 26, before the tightening began, and 14.9 percent below the level at the start of 2018, pushing up import prices and thus inflation.
In addition to raising its policy rate, the central bank also took other measures to restore calm to financial markets, and said it would continue to intervene in foreign exchange markets, with both cash and term transactions.
On Thursday the BCRA said it had sold another $451 million, the day after its sold about $500 million. In March and April the central bank had sold $6.77 billion, more than 10 percent of its reserves, according to Reuters.
It raised the ceiling of its 7-day active pass rate to 47 percent from 38.25 percent, the passive rate raised to 33.0 percent, and one-day rates were raised to 57 percent for active passes and 28.0 percent for the passive.
With effect on Monday, the net positive global position of foreign currency held by financial institutions may not exceed 10 percent of liquid equity
In parallel with the central bank's moves, the government of Mauricio Macri cut its target for the primary fiscal deficit this year to 2.7 percent of Gross Domestic Product from 3.2 percent and confirmed its commitment to the 15 percent inflation target.
The latest troubles to hit Argentina were triggered on Dec. 28, 2017 when Macri's government - which is facing an election in October 2019 - pushed back its goal of lowering inflation to 5 percent by one year to 2020 and raised the inflation target to 15 percent from a previous 8-12 percent.
On Jan. 9 and Jan. 23 the central bank then lowered its key rate in two steps by a total of 150 basis points, arguing the rise in inflation is transitory and will continue its downward trend once the one-off impact of a higher in regulated prices dissipates.
But inflation is still rising and rose to 25.6 percent in March from 25.4 percent in February.
Macri's government, which took office in 2015, has been slashing government subsidies to utilities and transportation in an effort to curb the fiscal deficit.
www.CentralBankNews.info
Thursday, May 3, 2018
Argentina hikes rate another 300 bps, ready to act again
Argentina's central bank raised its monetary policy rate by another 3 percentage points to 33.25 percent, less than a week after its last unscheduled rate hike, saying the tightening was aimed at guaranteeing disinflation and that it "is ready to act again if necessary."
The Central Bank of Argentina (BCRA) has now raised its benchmark rate by a total of 600 basis points since April 27 and said today's rate hike came amidst high international volatility on the foreign exchange market where the drop in the peso has accelerated despite the rate hikes.
BCRA also increased the distance between the policy rate and the ceiling of its 7-day active pass rate by 500 basis points to 38.25 percent. BCRA uses the operation of passes, the purchase of sale of securities, and auctions of letters and notes, to manage liquidity.
"The Central Bank will continue using all the tools at its disposal and will conduct its monetary policy to reach its intermediate target of 15% in 2018," the BCRA said.
Despite the two massive rate hikes in less than a week, the peso fell to 21.97 to the U.S. dollar today, down 6.6 percent since Monday and down 7.9 percent since April 26, before the first rate rise.
Since the start of this year, the peso has now depreciated 15.4 percent against the dollar and since the start of 2017 it has lost almost 28 percent, despite repeated intervention by BCRA to defend it.
The two rate hikes follow two rate cuts in January by a total of 150 basis points that came in response to the government's decision in late December to ease the inflation target, a move that was seen as allowing the BCRA to ease its policy and thus help stimulate economic growth.
The government of Mauricio Macri, which is facing an election in October 2019, pushed back its goal of lowering back inflation to 5 percent by one year to 2020 and raised the 2018 inflation target to 15 percent from a previous 8-12 percent.
But instead of decelerating toward the new 15-percent target, Argentina's inflation rate has been rising and hit 25.6 percent in Mach, up from 25.4 percent in February.
In addition to higher import prices from the fall in the peso, Argentina's inflation rate has been boosted by the government's cut in subsidies on regulated prices, such as energy and transportation, in an effort to narrow the deficit.
In early April the BCRA said the recent rise in inflation was transitory and once the one-factors dissipated, inflation would continue the downward trend observed in 2016 and in early 2017.
BCRA has now raised its key rate by a net 450 basis points this year.
www.CentralBankNews.info
The Central Bank of Argentina (BCRA) has now raised its benchmark rate by a total of 600 basis points since April 27 and said today's rate hike came amidst high international volatility on the foreign exchange market where the drop in the peso has accelerated despite the rate hikes.
BCRA also increased the distance between the policy rate and the ceiling of its 7-day active pass rate by 500 basis points to 38.25 percent. BCRA uses the operation of passes, the purchase of sale of securities, and auctions of letters and notes, to manage liquidity.
"The Central Bank will continue using all the tools at its disposal and will conduct its monetary policy to reach its intermediate target of 15% in 2018," the BCRA said.
Despite the two massive rate hikes in less than a week, the peso fell to 21.97 to the U.S. dollar today, down 6.6 percent since Monday and down 7.9 percent since April 26, before the first rate rise.
Since the start of this year, the peso has now depreciated 15.4 percent against the dollar and since the start of 2017 it has lost almost 28 percent, despite repeated intervention by BCRA to defend it.
The two rate hikes follow two rate cuts in January by a total of 150 basis points that came in response to the government's decision in late December to ease the inflation target, a move that was seen as allowing the BCRA to ease its policy and thus help stimulate economic growth.
The government of Mauricio Macri, which is facing an election in October 2019, pushed back its goal of lowering back inflation to 5 percent by one year to 2020 and raised the 2018 inflation target to 15 percent from a previous 8-12 percent.
But instead of decelerating toward the new 15-percent target, Argentina's inflation rate has been rising and hit 25.6 percent in Mach, up from 25.4 percent in February.
In addition to higher import prices from the fall in the peso, Argentina's inflation rate has been boosted by the government's cut in subsidies on regulated prices, such as energy and transportation, in an effort to narrow the deficit.
In early April the BCRA said the recent rise in inflation was transitory and once the one-factors dissipated, inflation would continue the downward trend observed in 2016 and in early 2017.
BCRA has now raised its key rate by a net 450 basis points this year.
www.CentralBankNews.info
Tuesday, April 10, 2018
Argentina holds rate, April inflation to ease from March
Argentina's central bank left its monetary policy rate at 27.25 percent and confirmed it expects inflation to decelerate after the impact of a hike in regulated prices, such as utilities and transportation, and the recent peso depreciation wanes.
The Central Bank of Argentina (BCRA), which has kept its rate steady since cutting it twice in January by a total of 150 basis points, added it expects core inflation to remain high in April but to decline from March.
Argentina's headline inflation rate rose to 25.4 percent in February from 25.0 percent in January and 24.8 percent in December, and the most recent survey of market expectations shows a rise in expected 2018 headline inflation to 20.3 percent from 19.9 percent and a rise in core inflation to 18.1 percent from 17.1 percent.
In addition, inflation expectations for 2019 rose to 14.3 percent from 14.0 percent and to 10.0 percent for 2020 from 9.7 percent, BCRA said, adding expected inflation for the next 12 months rose to 17.8 percent from 17.6 percent.
The central bank targets inflation of 15 percent for 2018 and 10 percent in 2019. In late December Argentina's government pushed back its goal of lowering inflation to 5 percent by one year to 2020 and raised the 2018 target to 15 percent from a previous 8-12 percent.
After decelerating during last year, Argentina's inflation rate has risen this year due to sharp increases in regulated prices, to reduce the government deficit, and a rapid fall in the exchange rate of the peso from December to March.
The BCRA has often maintained the recent rise inflation is transitory and once these factors evaporate, inflation will continue its downward trend.
Among the reasons for lower inflation are a more restrictive monetary policy that last year, wage increases in line with the 15 percent inflation goal and a slowdown in changes to regulated prices after April.
In addition, BCRA said its continuing intervention in the foreign exchange market means it doesn't expect any significant depreciation of the peso in coming months.
As in recent months, BCRA said intervention in the currency market is complementary and not a substitute for monetary policy, and it remains convinced that depreciation in excess of what has already occurred is not justified by the economy or the planned course of monetary policy.
The central bank added that it considers its current policy bias as adequate to ensure that inflation declines toward its goal, but it "is ready to act by adjusting its monetary policy rate if this does not happen."
After falling from early December through early March, the peso has stabilized in recent weeks and was trading at 20.15 to the U.S. dollar today, down 7.7 percent this year.
www.CentralBankNews.info
The Central Bank of Argentina (BCRA), which has kept its rate steady since cutting it twice in January by a total of 150 basis points, added it expects core inflation to remain high in April but to decline from March.
Argentina's headline inflation rate rose to 25.4 percent in February from 25.0 percent in January and 24.8 percent in December, and the most recent survey of market expectations shows a rise in expected 2018 headline inflation to 20.3 percent from 19.9 percent and a rise in core inflation to 18.1 percent from 17.1 percent.
In addition, inflation expectations for 2019 rose to 14.3 percent from 14.0 percent and to 10.0 percent for 2020 from 9.7 percent, BCRA said, adding expected inflation for the next 12 months rose to 17.8 percent from 17.6 percent.
The central bank targets inflation of 15 percent for 2018 and 10 percent in 2019. In late December Argentina's government pushed back its goal of lowering inflation to 5 percent by one year to 2020 and raised the 2018 target to 15 percent from a previous 8-12 percent.
After decelerating during last year, Argentina's inflation rate has risen this year due to sharp increases in regulated prices, to reduce the government deficit, and a rapid fall in the exchange rate of the peso from December to March.
The BCRA has often maintained the recent rise inflation is transitory and once these factors evaporate, inflation will continue its downward trend.
Among the reasons for lower inflation are a more restrictive monetary policy that last year, wage increases in line with the 15 percent inflation goal and a slowdown in changes to regulated prices after April.
In addition, BCRA said its continuing intervention in the foreign exchange market means it doesn't expect any significant depreciation of the peso in coming months.
As in recent months, BCRA said intervention in the currency market is complementary and not a substitute for monetary policy, and it remains convinced that depreciation in excess of what has already occurred is not justified by the economy or the planned course of monetary policy.
The central bank added that it considers its current policy bias as adequate to ensure that inflation declines toward its goal, but it "is ready to act by adjusting its monetary policy rate if this does not happen."
After falling from early December through early March, the peso has stabilized in recent weeks and was trading at 20.15 to the U.S. dollar today, down 7.7 percent this year.
www.CentralBankNews.info
Tuesday, March 13, 2018
Argentina maintains rate, confirms peso intervention
Argentina's central bank kept its monetary policy
rate at 27.25 percent and confirmed its intervention in foreign exchange
markets in recent weeks to "sustain the value of the currency" and
ensure that inflation continues to trend downward.
The Central Bank of Argentina (BCRA), which cut its policy rate
twice in January by a total of 150 basis points, also pledged that it is
monitoring the situation on the foreign exchange market and "will not
relax its monetary policy until signs of disinflation compatible with the path
sought are confirmed."
Today's guidance follows it previous guidance in late February that it
would "exercise extreme caution" before relaxing its monetary
policy.
BCRA has been intervening in the foreign exchange market in
recent weeks to shore up the peso, which has weakened steadily since Mauricio
Macri's government in late December pushed back its aim to lower inflation to 5
percent by one year to 2020 and raised the 2018 inflation target to 15 percent
from a previous 8-12 percent.
BCRA said it decided to intervene because it was convinced
that a depreciation of the peso greater than what already happened was not
justified by real economic conditions or the planned course of monetary
policy.
Without any intervention in support the peso, the
disinflation process would potentially slow down, the central bank said, adding
it ratifies its policy of a floating exchange rate with occasional
interventions as a complement to monetary policy "in the face of
disruptive dynamics capable of altering the course of inflation or generating
negative effects on financial conditions."
On March 8 the central bank was reported to have
intervened in the currency market several times by selling U.S. dollars, its
first intervention since August 2017. The first foreign exchange sales came
after the peso topped 20 to the U.S. dollar.
In addition to the impact from a higher inflation
target, Argentina suffers a seasonal shortage of dollars during its summer
months as revenue from exports doesn't arrive until late March while holidays
and overseas trips generate demand for foreign currency.
"After the pronounced depreciation observed since
December, during the last weeks the peso continued to show signs of
weakness," BCRA said.
Today the peso was trading at 20.2 to the dollar, down 7.9
percent since the start of 2018 and down 21.5 percent since the start of 2017.
Argentina's headline inflation rate rose slightly to 25
percent in January from 24.9 percent in December while core inflation was
steady at 21.1 percent.
For February the BCRA said inflation is expected to rise
further due to higher regulated prices and the prices of some tradable goods.
But the central bank said it considers this acceleration
in inflation as "temporary" and inflation should consolidate the
downward trend after adjusting to higher prides and exchange rate dynamics.
BCRA said the latest survey of market expectations showed
inflation expectations for 2018 rose to 19.9 percent from 19.4 percent for
general inflation and to 17.1 percent from 16.9 percent for core inflation. For
the next 12 months, expectations eased to 17.6 percent from 18.6 percent.
For 2019 inflation expectations rose to 14.0 percent from
13.5 percent and to 9.7 percent from 9.1 percent for 2020.
In addition to rising inflation, Argentina is experiencing its worst drought in 30 years, which has led economist to lower their growth forecasts for this year to 2.5 percent from 2.9 percent due to the expectations that the harvest of corn and soybeans, which make up more than one-third of its exports, will decline.
Argentina's economy grew by an annual rate of 4.2 percent in the third quarter of last year and is estimated to have grown 2.9 percent in 2017.
Tuesday, February 27, 2018
Argentina holds rate, 'extreme' caution before any cuts
Argentina's central bank left its monetary policy rate at 27.25 percent for the second time in a row and poured cold water on hopes for further rate cuts in the short term, saying it would "exercise extreme caution, awaiting signs of disinflation compatible with the path sought before relaxing its monetary policy."
Today's statement by the Central Bank of Argentina (BCRA) is more hawkish than its last monetary policy statement from Feb. 14 when it merely said it would "act with caution" given mixed signs about inflation.
BCRA cut its policy rate twice in January by a total of 150 basis points after the government raised the 2018 inflation target to 15 percent from 8-12 percent, allowing the central bank to pursue a looser policy stance.
However, inflation and inflation expectations have continued to rise, with national consumer prices up by 1.8 percent in January for an annual rise of 25.0 percent, up from 24.8 percent in December. Core inflation was steady at 21.1 percent.
BCRA attributed the rise in inflation to higher prices of agricultural and petroleum products, with the depreciation of the peso playing a role.
Data suggest that inflation in February, both on the general level and the core components, will be above the January values and those of the fourth quarter of 2017, BCRA added.
In late December Mauricio Macri's government pushed back its goal of lowering to inflation to 5 percent by one year to 2020 and raised its 2018 target to 15 percent from a previous 8-12 percent.
For 2019 Argentina's inflation target is 10 percent.
The International Monetary Fund has forecast 2018 inflation of 16.3 percent, 2019 inflation of 11.8 percent and 10.0 percent in 2020.
After stabilizing between August and November 2017, Argentina's peso has been weakening since early December - pushing up import prices - and was trading at 20.2 to the U.S. dollar today, down 7.9 percent this year and down 22 percent since early 2017.
www.CentralBankNews.info
Today's statement by the Central Bank of Argentina (BCRA) is more hawkish than its last monetary policy statement from Feb. 14 when it merely said it would "act with caution" given mixed signs about inflation.
BCRA cut its policy rate twice in January by a total of 150 basis points after the government raised the 2018 inflation target to 15 percent from 8-12 percent, allowing the central bank to pursue a looser policy stance.
However, inflation and inflation expectations have continued to rise, with national consumer prices up by 1.8 percent in January for an annual rise of 25.0 percent, up from 24.8 percent in December. Core inflation was steady at 21.1 percent.
BCRA attributed the rise in inflation to higher prices of agricultural and petroleum products, with the depreciation of the peso playing a role.
Data suggest that inflation in February, both on the general level and the core components, will be above the January values and those of the fourth quarter of 2017, BCRA added.
In late December Mauricio Macri's government pushed back its goal of lowering to inflation to 5 percent by one year to 2020 and raised its 2018 target to 15 percent from a previous 8-12 percent.
For 2019 Argentina's inflation target is 10 percent.
The International Monetary Fund has forecast 2018 inflation of 16.3 percent, 2019 inflation of 11.8 percent and 10.0 percent in 2020.
After stabilizing between August and November 2017, Argentina's peso has been weakening since early December - pushing up import prices - and was trading at 20.2 to the U.S. dollar today, down 7.9 percent this year and down 22 percent since early 2017.
www.CentralBankNews.info
Tuesday, January 23, 2018
Argentina cuts rate 75 bps, policy still contractionary
Argentina's central bank lowered its monetary policy rate for the second time in a row, saying it still considers the current contractionary bias of monetary policy to be "somewhat high" but it will be cautious in changing its policy to suit the path of disinflation.
The Central Bank of Argentina (BCRA) cut its policy rate by another 75 basis points to 27.25 percent and has now cut the rate by 150 points this year following a similar-sized cut on Jan. 9.
Argentina's headline inflation rate rose slightly to 24.8 percent in December from 22.4 percent in November but this reflected a rise in regulated prices of gas and electricity. The government has been slashing subsidies on a wide range of services to reduce its fiscal deficit.
And while inflation in 2017 fell by almost 12 percentage points from 2016, the BCRA said this deceleration was not as fast as it wanted, with 2017 inflation averaging 24.8 percent.
Reiterating earlier comments, the central bank said the the deviation of inflation from its 2017 target of 12-17 percent was due to a premature relaxation of monetary policy between October 2016 and March 2017 - when the rate was cut by a total of 200 basis points - and a higher-than-expected increase in regulated prices.
But the central bank then raised rates in April, October and November last year, with the result that inflation has been trending lower in recent months and is expected to continue to decline this year as regulated prices are expected to rise by 21.8 percent this year, below a 38.7 percent rise in 2017.
"The central bank will conduct its monetary policy to reach its intermediate target of 15% in 2018," the BCRA, referring to the new inflation target that was set by the government in December.
In late December Mauricio Macri's government pushed back its aim to lower inflation to 5 percent by one year to 2020 and raised its 2018 target to 15 percent from a previous 8-12 percent.
For 2019 the inflation target is 10 percent.
The International Monetary Fund has forecast 2018 inflation of 16.3 percent, 2019 inflation of 11.8 percent and 10.0 percent in 2020.
After stabilizing in the second half of 2017, Argentina's peso has been falling since early December and was trading at 19.33 to the U.S. dollar today, down 3.6 percent this year and down 19.2 percent since the start of 2017.
www.CentralBankNews.info
The Central Bank of Argentina (BCRA) cut its policy rate by another 75 basis points to 27.25 percent and has now cut the rate by 150 points this year following a similar-sized cut on Jan. 9.
Argentina's headline inflation rate rose slightly to 24.8 percent in December from 22.4 percent in November but this reflected a rise in regulated prices of gas and electricity. The government has been slashing subsidies on a wide range of services to reduce its fiscal deficit.
And while inflation in 2017 fell by almost 12 percentage points from 2016, the BCRA said this deceleration was not as fast as it wanted, with 2017 inflation averaging 24.8 percent.
Reiterating earlier comments, the central bank said the the deviation of inflation from its 2017 target of 12-17 percent was due to a premature relaxation of monetary policy between October 2016 and March 2017 - when the rate was cut by a total of 200 basis points - and a higher-than-expected increase in regulated prices.
But the central bank then raised rates in April, October and November last year, with the result that inflation has been trending lower in recent months and is expected to continue to decline this year as regulated prices are expected to rise by 21.8 percent this year, below a 38.7 percent rise in 2017.
"The central bank will conduct its monetary policy to reach its intermediate target of 15% in 2018," the BCRA, referring to the new inflation target that was set by the government in December.
In late December Mauricio Macri's government pushed back its aim to lower inflation to 5 percent by one year to 2020 and raised its 2018 target to 15 percent from a previous 8-12 percent.
For 2019 the inflation target is 10 percent.
The International Monetary Fund has forecast 2018 inflation of 16.3 percent, 2019 inflation of 11.8 percent and 10.0 percent in 2020.
After stabilizing in the second half of 2017, Argentina's peso has been falling since early December and was trading at 19.33 to the U.S. dollar today, down 3.6 percent this year and down 19.2 percent since the start of 2017.
www.CentralBankNews.info
Sunday, January 21, 2018
This week in monetary policy: Ghana, Kenya, Japan, Nigeria, Argentina, Paraguay, Fiji, Malaysia, Norway, Ukraine, euro area and Malawi
This week (January 21 through January 27) central banks from 12 countries or
jurisdictions are scheduled to decide on monetary policy: Ghana, Kenya, Japan, Nigeria, Argentina, Paraguay, Fiji, Malaysia, Norway, Ukraine, the euro area and Malawi.
Following table includes the name of the country, the date of the next policy
decision, the current policy rate, the result of the last policy decision, the
change in the policy rate year to date, the rate one year ago, and the
country’s MSCI classification.
The
table is updated when the latest decisions are announced and can always
accessed by clicking on This Week.
| WEEK 4 | ||||||
| JAN 21- JAN 27, 2018: | ||||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO | MSCI |
| GHANA | 22-Jan | 20.00% | -100 | 0 | 25.50% | FM |
| KENYA | 22-Jan | 10.00% | 0 | 0 | 10.00% | FM |
| JAPAN | 23-Jan | -0.10% | 0 | 0 | -0.10% | DM |
| NIGERIA | 23-Jan | 14.00% | 0 | 0 | 14.00% | FM |
| ARGENTINA | 23-Jan | 28.00% | -75 | 0 | 24.75% | FM |
| PARAGUAY | 23-Jan | 5.25% | 0 | 0 | 5.50% | |
| FIJI | 25-Jan | 0.50% | 0 | 0 | 0.50% | |
| MALAYSIA | 25-Jan | 3.00% | 0 | 0 | 3.00% | EM |
| NORWAY | 25-Jan | 0.50% | 0 | 0 | 0.50% | DM |
| UKRAINE | 25-Jan | 14.50% | 100 | 0 | 14.00% | FM |
| EURO AREA | 25-Jan | 0.00% | 0 | 0 | 0.00% | DM |
| MALAWI | 26-Jan | 16.00% | -200 | 0 | 24.00% | |
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