The findings of the Market Expectations Survey (REM) performed by the BCRA were released last week. The median monthly expected inflation rates of the CPI for Greater Buenos Aires (released by the National Institute of Statistics and Censuses (Instituto Nacional de Estadísticas y Censos, INDEC)) for the following months and for 2017 (year on year) are as follows:
| Headline | Core | |
|---|---|---|
| September 2016 | 1.3% | 1.7% |
| October 2016 | 1.7% | 1.6% |
| November 2016 | 1.8% | 1.5% |
| December 2016 | 1.6% | 1.5% |
| 2017 | 19.8% | 17.9% |
Headline inflation expectations for the last quarter of 2016 are slightly above the BCRA’s inflation target of 1.5% or less per month over the same period. However, core inflation expectations—reported for the first time—are virtually in line with the BCRA’s target.
The difference between the forecasts for the core and headline inflation rates are probably due to the expected changes in regulated prices already announced.
The indicators and estimates from public and private sources monitored by the BCRA suggest that the disinflation process continues to roll on in August, leaving aside the reversal in regulated price increases.
On the basis of this information, the BCRA reduced both the monetary policy rate and the repo rates by 50 basis points, the former falling to 27.75%. The BCRA will continue to take precautionary actions seeking to ensure a sustained disinflation process. Considering the lag in the monetary transmission mechanism, the BCRA deems it appropriate to focus monetary policy on medium-term inflation expectations, especially those of 2017.
The BCRA will continue to take anti-inflationary measures to ensure a sustained disinflationary process to achieve the objective for this year (1.5% monthly inflation rate or lower in the last quarter), and a decreasing trend of inflation expectations for 2017 (17% or lower).
