Fynsa
I know that the idea has never been to entertain us and that for that there are other things (like The Office), but the last monetary policy statement, along with its MPI, was pretty lame. I am not saying that this is necessarily bad, I am just referring to the fact that, with respect to the previous ones, there was not much change, neither in the analysis, nor in the analysis of the monetary policy, there was not much change either in the analysis of the macro situation or in the Bank's monetary policy response to it.
First, at the meeting earlier in the week, the Central Bank's Board unanimously decided to cut the TPMR by 75 basis points, which was more or less within expectations. I say "more or less" because the market was debating between 75 and 100 basis points, but either was perceived as a plausible option. This decrease is less than the one that started the downward cycle (100 bps), but it is in line with the expected trajectory for the rate in the coming months.
Secondly, our feeling is that the slowdown in the speed of the cuts is not related to changes in the scenario, but to certain risks that have arisen as a result of this decision. In simple terms, while the macro framework was maintained, the significant depreciation of the peso in recent months has bothered the Issuing Institute, which has not wanted to add "more gasoline" to the reduction of the rate differential. In fact, the very marginal increase at the end of the year for inflation (from 4.2% to 4.2%) and the increase in average inflation for the next year (from 3.3% to 3.5%) is influenced by an increase (or lower) of the volatile component and of underlying goods, which is closely related to the exchange rate evolution.
For the rest of the scenario, both base and risk, the main focus is on the external scenario, not only on growth, but also on inflation. The most worrisome ones have to do with the trajectory of monetary policy in developed economies and the weakness shown by the Chinese economy. The lower dynamism of this country has direct effects on our economy (for example, commodity prices and export value), but also indirect ones, due to a lower appetite for global risk that affects national assets. Therefore, the evolution of China will be of first order to project future movements of the TPM, more than other local elements that were preponderant during the last semesters.
Finally, we estimate that the central bank will continue to cut the rate over the next few meetings at a speed more similar to recent moves than at a slower one.. Even if we do see upside inflationary surprises in the coming months, they will most likely respond to one-time shocks that do not call into question the easing of inflationary pressures as a whole. With this, we maintain our projection for the year-end TPMR of 7.5%, and 3.75% by December 2024.
