Monday , June 14 2021

REM: Reducing inflation, but with lower recession

After a fall in exchange rates in August, new estimates of inflation (and expectations) were introduced, which is followed by further price increases. In September, the inflation expectations reached a peak of 31.9% over the next twelve months, and expectations for a new monetary policy scheme based on monetary aggregates have dropped by half. It is expected that the overall price level will increase by 47.5% in the previous year, and by 2019 it will be estimated at 27.5%, which is close to the expected level. The budget for the next year was approved at the Congress.

On the other hand, in relation to remuneration rates, it is expected that in December it will reduce by about 500 basis points to 60%. As it was stated earlier, the expected inflation may cause Leliq to drill up to 60% in the short run, but we can expect big losses. Remarkably, the highest tariffs for the last two months have been reduced from 73 to 10 percentage points. It is expected that by December next year the yield will drop to 35%, which is considered to be safer than Lebak because Leliq will be offered to banks that are not available to private investors only.

High interest rates will be correlated at the level of service, as GDP is expected to fall by 2.4% in 2018 and 1.2% by 2019. which is projected by the IMF and in the next year's budget by more than 0.5%. In any case, until 2020, inflation is expected to be below 20% (19.2%, according to analysts' forecasts). In turn, the planned budget deficit corresponds to the previous editions and the budget project. By 2018 it will be $ 356.2 billion red, and in 2019 the expected primary outcome will be 2019.

In addition, the new BCRA scheme offered by Guido Sandleris has brought great calm to the stock market. In December, the dollar is expected to drop from $ 40 dollars ($ 39, according to experts' estimates), and next year it is expected to be at $ 48.5. In this case, if these conditions are met, 2019 will be an attractive year for investment in pie, as evolution is below 24.3% of the forecasted inflation rate. In any case, the impact of the election should be considered when the demand for foreign currency is usually rising in terms of uncertainty.

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