The findings of the Market Expectations Survey (Relevamiento de Expectativas de Mercado, 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 | |
|---|---|---|
| October 2016 | 2.0% | 1.5% |
| November 2016 | 1.7% | 1.5% |
| December 2016 | 1.6 % | 1.5 % |
| 2017 | 20.0% | 17.7% |
Headline inflation expectations for the last quarter of 2016 are above the BCRA’s inflation target of 1.5% or less per month in that quarter. However, core inflation expectations are in line with the BCRA’s target. These values are similar to those forecast in the previous month’s survey, with an increase in the expected variation for headline inflation in October (1.7% in August’s survey) and a decrease for headline inflation in November (1.8%) and core inflation in October (1.6%).
The difference between the forecasts for the core and headline inflation rates are probably due to the expected changes in regulated prices. This difference is also observed in the forecasts for 2017: 20% for headline inflation (19.8% in the previous month’s survey) and 17.7% for core inflation (17.9%).
In turn, the estimates and high-frequency indicators from public and private sources monitored by the BCRA show a price evolution in line with the disinflation path set by the monetary authority for the following months.
Beyond the clear disinflation process that has occurred over the past few months, the aforementioned inflation expectations for 2017 are three points above the upper end of the target range of 12% to 17%. Thus, the BCRA has decided to keep both the monetary policy rate (at 26.75%) and the repo rates unchanged. This measure seeks to consolidate this year’s disinflation process and to help in the convergence of inflation expectations for 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.
