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The Central Bank has removed the 60% floor at the interest rate – 05/12/2018



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As expected, The Central Bank has removed the 60% discount on Wednesday at the interest rate Luis Caputo set in August. Besides, fell from 3% to 2% Monthly dollar-free daily intervention.

Guido Sandleris, the head of the entity, maintained the order of the previous one, indicating that the rate was to stay at least 60% until December. Investors were a sign of access to dollars for the guaranteed rate. In the agreement with the Monetary Fund, it was agreed that the possibility of eliminating the floor would have been reduced for two consecutive months, the BCRA's expectations of inflation in the REM survey.

"For two consecutive years, the significant fall in inflation expectations and, according to the forecast, the weight of interest rates of 60% were eliminated. Interest rates rose on August 30. The previous monetary system was refused the marketing of the new money scheme on September 26, 1996," said Banks in a press release.

"At that time, the BCRA maintained its earlier commitment, even if the floor limits the endogenous nature of the interest rate in the aggregate currency system. "It is a measure adopted by Sandleris, instead of the inflationary targets for price rises, it reduces the flow of money, a rate some months ago. On Tuesday, the daily offer of Leliq was 60,003% and the average was 60.01%.

At the end of this rate, the BCRA Monetary Union Committee (Copom) defined it and it met on Wednesday.

According to the central data, in October and November, the organizations it was overfulfilled Monetary Fund Objective (WB). The average BM months were $ 19 thousand and $ 15 million in 1971 $ million, respectively.

The average inflation expectations for the next 12 months, measured by REMs, were up 29% in November. The figure was 33.4% at the end of August, 32.9% in September and 32.1% in October. Compared with the three-month inflationary expectation, a 4.4 point reduction is accumulated.

"Continue the BCRA very carefully over the next months. In this sense, Copome wants to face the end of December. The surplus will be at least $ 16 million. This figure maintains a great success in the last two months, "the statement added.

Buying and selling dollars

Copome also has established that if the exchange rate falls below the fixed band MFF (non-intervention area), today around $ 36.17 will increase its target base dollar purchases Offers from the BCRA. These offers will be available in December, 50 million dollars a day. Accumulated in the months of these offers Can not pass the 2% goal.

If the exchange rate is higher than the non-intervention area, The money base is also reduced to the dollar sales The offers will be $ 150 million a day, which is envisaged in the maximum monetary system.

Finally, in the context of the decline in inflation expectations, Copom defined a new non-intervention exchange band in the first quarter of 2019. "As a benchmark for reference, at 31 December 2018 ($ 37,117 and 48,034 million), respectively, the non-intervention limits will be updated daily Monthly rate of 2% From January 1 to March 31, 2019, before 3%.

This means that the fall in inflation is expected to be forecast, which does not have to update the currency value, while it does not remain behind.

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