The Monetary Policy Committee of the Central Bank of the Argentine Republic (COPOM) has decided to provide additional details about the operation of the monetary scheme for the month of February.
The BCRA continues to meet the Monetary Base (WB) target. The monthly average of the WB in January was $1.345 billion, $12.141 billion below the target and 0.6% higher than the December average.
Demand for instruments in pesos grew in January, especially time deposits, which increased 8.5% compared to December. This dynamic had its counterpart in the foreign exchange market. The exchange rate was below the non-intervention zone for most of the month and the BCRA began to implement the mechanism for foreign currency purchases contemplated in the monetary scheme. The BCRA purchased US$ 560 million (equivalent to $ 20,876 million, 1.55% of the WB target as of January 1) following the guidelines defined by the COPOM at its previous meeting. The pesos injected through these purchases added $6.792 billion to the WB goal for January and the total of $20.876 billion for the following months.
The BCRA was cautious in its handling of the WB’s expansion. The financial system operates with lags in its intermediation and, therefore, the BCRA calibrated the speed of monetary expansion to adjust to these times.
The COPOM considers that the WB’s goal for the month of February is consistent with the projected demand for assets in pesos. However, the BCRA will remain cautious about the speed of monetary expansion, which could imply an over-compliance with the target if money market conditions require it. This eventual over-compliance will be reversed in subsequent months.
The COPOM resolved the following guidelines for the eventual interventions to be carried out during the month of February, in the event that the exchange rate was outside the non-intervention zone:
If the exchange rate is below the non-intervention zone, the monetary base target will increase with the purchases of dollars made through BCRA tenders. These tenders will be up to US$ 75 million per day. The accumulated value in pesos in the month of these auctions may not exceed by 3% the value of the target as of February 1, which is $ 1,372 billion.
If the exchange rate is above the non-intervention zone, the monetary base target will be reduced with the sales of dollars made through BCRA tenders. In order to maximize the impact on liquidity, these auctions will be up to US$ 150 million per day, the maximum contemplated in the monetary scheme.
The main objective of the Central Bank is to reduce inflation, which is still very high. The COPOM considers that a strict control of monetary aggregates will lead to this objective, and the decisions taken for the month of February will be consistent with it.
The resolutions mentioned in this communiqué were adopted with the unanimous approval of the members of COPOM. It is made up of the President, Guido Sandleris, the Vice President, Gustavo Cañonero, the Second Vice President, Verónica Rappoport, Enrique Szewach, Director appointed by the Board of Directors of this Central Bank, and Mauro Alessandro, Deputy General Manager of Economic Research.
