Fynsa
I won't say I expected it, but it happened. Nor for the reasons given, but that's all there was to it. At the June meeting and subsequent release of the IPoM, the Central Bank kept the TPM at 11.25%, as expected, but left the door wide open for the immediate beginning of a cycle of cuts aimed at reducing the "contraction" of monetary policy.
It is curious what happened because the macro scenario that was presented was not very different from that of March and from what we thought was going to happen. Given that, we saw no reason to change the monetary policy stance, but we were not counting on a quite different assessment of the risk scenario. In this regard, the probability that the process of convergence to inflation will be interrupted or definitely reversed has fallen significantly, something that, although we shared, we did not rule out outright.
An interesting indicator, which unfortunately we do not have access to, refers to the frequency in which companies are modifying their prices. This work with micro data is something that has been complementing the usual analysis made by the regulator and that allows us to identify certain trends that are sometimes hidden by the aggregate figures. Thus, after a period in which price movements by firms had increased mainly because of those that had been increasing them (both for goods and services), today we see that, although these firms have been increasing their prices, they have not been increasing their prices, today we see that, although these variations have remained high, they have been caused by a rise in those firms that have lowered their prices.
However, not everything is black and white. There are still elements of risk that need to be monitored, especially those related to products that by their nature are more persistent. Services play a key role here and there are several that have yet to show a slowdown similar to what activity has been showing in recent months. As this is still present, monetary normalization would begin sooner, but would be slower. The dissenting votes at this meeting provide interesting clues about the process, with two councilors leaning towards reducing the rate by 50 bp. Nothing in the Central Bank's communiqués is a coincidence, and this information seems to me to be key to what could happen at the July meeting and beyond. Thus, the reduction cycle would start with these 50 bp cuts and, as data show (or not) the consolidation of inflationary normalization, we could see some acceleration of the process. But piano piano.
