Fynsa
The Central Bank recently published its June Monetary Policy Report (IPoM), in which it updated its macroeconomic scenario. Given the complexities of the process -and the series of stages it goes through before being made public-, the report has an explicit statistical closure, which is usually set a week before its publication. Considering that the Council's outlook contemplates medium and long-term trends and movements, what happens during those days is generally not enough to substantially affect what is stated in the IPoM. This time, however, things could be different.
Between the statistical close and the publication of the report, events occurred that do have the potential to alter the scenario. Israel's bombing of Iran, together with Iran's response, could modify assumptions included in the document, such as the price of oil and other commodities, global growth prospects, inflation, risk appetite, among others. Although these events were considered qualitatively by the Board, they are not reflected in the quantitative projections.
Thus, it is valid to ask whether, because of this unfortunate coincidence, the report is obsolete and a new one should be prepared. In fact, it was one of the corridor comments only moments after the file became available on the Central Bank's website. However, we believe that, for several reasons, this is not the case.
First, while the onset of aggression between the two countries is important, it is not the only element that is injecting volatility into the markets. Also present are the trade war, the increase in US debt, the Russian invasion of Ukraine and the Palestinian-Israeli conflict, among others. In this sense, greater global uncertainty is considered in the projections, both in the base scenario and in the risk scenarios.
Second, although the overall effects of a conflict of this magnitude are uncertain, the transmission channels into the national economy are not unknown, nor are they something that has not been faced before.
As a third point, these events are so dynamic that, at the time of writing, the end of the, according to Trump, proclaimed "12-day war" was already being announced. Although it seems hasty for us to consider the conflict over, the impacts on the markets that could have affected the IPoM - had they been considered more permanent - would be receding.
Finally, it should not be forgotten that macro frames are not commandments written in stone. Reality is more complex than it seems (to paraphrase Drexler) and modern central banks have designed strategies precisely to navigate turbulent waters. As is often reiterated in the penultimate paragraphs of their communiqués, the objective is to manage monetary policy flexibly. The best central bank is not the one that gets it right, but the one that adapts best. It is by adapting that we will converge to the 3% inflation target in two years.
