Decisions Taken by the Monetary Policy Council (COPOM)

Buenos Aires, March 14, 2019. The Monetary Policy Council (COPOM) of the BCRA has decided to provide further information on the development of the monetary scheme for April and the coming months.

The BCRA continues to overcomply with the Monetary Base (MB) target. The monthly average as of March 14 totaled ARS1,329 billion, down ARS14 billion against the ARS1,343 billion target. During the first half of March, the BCRA actually absorbed an amount of pesos above that required to fulfil the objective stated in February’s release.

During this period, the benchmark interest rate increased significantly. As of March 14, the monetary policy benchmark interest rate stood at 63.66%. It stands for 13.5 p.p. up against end February, and is in line with the monetary scheme adopted by the BCRA. It reacts to market conditions and expectations endogenously and quickly, thus reinforcing its contractionary bias in light of increases in the expected inflation rate or changes in risk perception.

The BCRA’s main objective is to reduce inflation, which is still very high. For that reason, beyond the endogenous stabilizers of the monetary scheme, the COPOM believes it necessary to reinforce the control of monetary aggregates. The inflationary dynamics of the first months of the year has been influenced by readjustments in relative prices and residual effects of the 2018 exchange rate instability. Hence, the following measures are intended to prevent it from becoming persistent.

Firstly, the COPOM has determined to extend the 0% growth of the MB target until December 2019, when the monetary base will be seasonally adjusted.

Secondly, the COPOM has decided to extend until the end of the year the overcompliance of the MB target recorded in February. Thus, the average monthly target of the MB is set at ARS1,343 billion for the rest of the year (net of foreign currency purchases and December's seasonal increase).

Thirdly, the COPOM is cautious about expanding the MB should the BCRA intervene in April where the foreign exchange rate lays outside the non-intervention range. Intervention would occur:

- If the foreign exchange rate were below the non-intervention range. In this case, the monetary base target would be adjusted upwards as a result of purchases of US dollars through BCRA's auctions. Auction volumes will amount, as a maximum, to USD50 million a day, and to 2% of April’s MB target.

- If the foreign exchange rate were above the non-intervention range. In this case, the monetary base target would be adjusted downwards as a result of sales of US dollars through BCRA's auctions. In order to maximize the impact on liquidity, the BCRA may auction up to USD150 million daily, as established in the monetary scheme.

Finally, the COPOM set the limits of the foreign exchange non-intervention range that will serve as a basis for the BCRA to take actions in 2019 Q2. Based on the foreign exchange rate floor and ceiling as of March 31, 2019 (ARS39,389 and ARS50,974, respectively), the non-intervention range will be updated daily at a 1,75% monthly rate from April 1 to June 30, 2019.

Disinflation is not just a linear process, especially in the presence of the short-term economic inertia. The COPOM considers that persistence in keeping a tight control together with the measures already announced will lead to reducing inflation.

The measures described here have been adopted with the unanimous approval of all COPOM members. The COPOM is composed of Guido Sandleris, Governor; Gustavo Cañonero, Deputy Governor; Verónica Rappoport, Alternate Deputy Governor; Enrique Szewach, member of the Board appointed by the Board of this Central Bank; and Mauro Alessandro, Economic Research Deputy General Manager.


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