Fynsa
The nominees for the 95th Academy Awards, better known as the Oscars, were recently announced. Once again, the lists are dominated by films produced by and for streaming companies, which have long stood out for their quality. Among them, one of the surprises was the Netflix-produced feature film “All Quiet on the Western Front” (Im Westen nichts Neues, the original German title), with nine nominations, including Best Picture, Best International Feature Film, and Best Adapted Screenplay. This film, the first cinematic adaptation of the 1929 book of the same name, tells the story of a group of young Germans who enlist in the army to fight in World War I, whose initial enthusiasm gradually fades as the reality of war hits them without any mercy.
Although the tone was less cinematic and definitely less war-like, there wasn’t much news on the monetary front eitherfollowing our Central Bank’s latest monetary policy meeting. As widely expected (though with a few outliers), the rate remained at 11.25%, a decision that was made unanimously by the board members. Among the reasons outlined, there were not many surprises either, although we would like to highlight two important points.
First, the external environment—both economic and financial—is, on the whole, better. However, the medium- and long-term outlook, as well as the challenges and risks, has not changed. This means that global growth will slow, inflation will remain high but will continue to decline, and benchmark interest rates, on average, will continue to rise. Therefore, short-term fluctuations in financial assets or expectations must be carefully evaluated when determining whether they represent trend reversals or merely corrections.
Second, for various reasons, the peso has appreciated. This is true not only against the dollar but also against comparable currencies, in both nominal and real terms. To put it in numbers, our estimate is that the real exchange rate currently stands at slightly over 99 points, which is lower than the 5-year average and only 3 points above the 10-year average. The Central Bank considers this to be of the utmost importance, so much so that it states it will assess the implications in the next IpoM. These implications could, as is obvious, lead to less external inflationary pressure, but also to a reduced ability to resolve other macroeconomic imbalances, such as the current account deficit. Which of these factors is more significant will directly determine the next steps to be taken in monetary policy.
Finally, it is noted that monetary policy has indeed helped correct imbalances, so there is a positive assessment of what has been done so far. In our view, this is still insufficient, and the data needed for a more comprehensive assessment will not be available (unless there is a drastic adjustment) by the April meeting. I mention this because the market expects adjustments to the TPM to begin then, while we expect them to come later—perhaps in June or July. We’ll see if, by that time, there’s any news on that front.
