The Monetary Policy Council of the BCRA (COPOM) has decided to provide further information on the development of the monetary scheme for the coming months.
In March, inflation was very high. In view of this, and even though the COPOM is aware that the main factors behind the increase in the inflation rate of the first few months of the year are left behind, it is necessary to reinforce the process of future disinflation.
The COPOM has decided to reduce the rate of adjustment of the non-intervention range to 0% for the rest of the year. That is, the floor and ceiling of the range will remain constant at ARS39.755 and ARS51.448, respectively, until December 31, 2019.
In addition, if the exchange rate stood below the non-intervention range, the BCRA would not purchase dollars until next June 30. This way, the BCRA gives priority to its disinflationary objective. Moreover, it will not expand the monetary base even when the behavior of the foreign exchange market suggests a rise in pesos demand.
Likewise, the BCRA would stick to the intervention rule for the quarter if the foreign exchange rate stood above the non-intervention range. In that case, and in order to maximize the impact on liquidity, the BCRA will auction up to USD150 million daily, as established in the monetary scheme, and the monetary base target will be adjusted downwards as a result of such sales.
However, disinflation is not a linear process, especially in the face of readjustments in relative prices and residual effects of foreign exchange instability of 2018. As mentioned before, the COPOM considers that these effects have started moderating in April and that tight controls on monetary aggregates imposed by the BCRA will lead the disinflation process for the coming months.
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 the BCRA; and Mauro Alessandro, Economic Research Deputy General Manager.
