Precaución – se acerca febrero

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Warning - February is Coming

First week
January 2020

The Board of the CB lowered the floor for the policy rate twice in December, reaching 55%. The cut in rates adds to the expansion of monetary aggregates that the former Board had been implementing, but since December it has been reinforced with an increase in cash holdings by the public. The seasonal rise in the money demand at the beginning of the summer will contribute toward the stabilization of the greater issuance of pesos, at least temporarily. The problem could arise in February, a time when the “tide” of seasonal pesos demand withdraws. At that moment, the CB must be ready to either absorb the remainder of liquidity or accept an increase in inflationary pressure and/or in FX spreads.