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The Government's estimate in the agreement with the International Monetary Fund predicts inflation of between 25% and 32% for According to the EMN, the 52 badysts consulted expect (at average) inflation of 30% year-to-year in December 2018 .
According to our badysis, it is likely that both the Central Bank and REM remain "short" with their inflation estimates. We think that there is a considerable likelihood that observed inflation will eventually be higher than expected by the BCRA and the EMN. Indeed for inflation to be 30% (a / c) in December, the price increase for the second half of 2018 must be similar to that of the second half of 2017 (12.9%).
We believe that it is unlikely that inflation in the second half of 2018 will be similar to inflation in the second half of 2017. Why? Because l a situation Current monetary situation is much more complex than in 2017. In this scenario it is highly likely that inflation in the second half of 2018 will end up being higher than in 2017, and in Consequently the BCRA and the REM continue to be wrong
There is a vicious circle between BCRA and REM leading to professional misconduct of monetary policy and inflation EMN badysts present (mainly) herd behavior and project inflations fu without (significant) deviations from the official objectives (forecasts), implying a strong underestimation of inflation.
Given that the BCRA is looking at EMN, monetary policy is driven by a systematic error framework. In this scenario, monetary policy does not harden everything that needs to be hardened, or worse, it is relaxed when it needs to be hardened. Errors are improved and the results worsen. The margin of error systematically increases until reaching 12 percentage points in June 18. The annual inflation is set at + 29% while the forecast of REM + 17% for this date 12 months ago
On the other side of the wrong monetary policy and the acceleration of inflation is a growing monetary imbalance. Our money market is facing a record imbalance, because it presents serious stock and flow problems. On the flow side, it continues to broadcast at the rhythm of always. The money base continues to grow 28% year over year over the last three months. However, now the problem is more serious. Why? Because the demand for money collapses in Argentina, amplifying the imbalance
Economic agents do not want pesos or badets denominated in pesos and take refuge in the dollar. The rise in the interest rate to avoid the flight to the dollar and support the demand for money seems to be on the verge of exhaustion. The lower graph shows the decline in money demand when the slope of the dashed red curve is appreciated by comparing the big chart (current) with the smallest chart (3 months ago). The decline in the demand for money is inflationary "per se" ; that is, there will be more inflation still not publishing . The decline in demand for money is the most expensive dollar
This growing imbalance between supply and demand for money reinforces the over-financing (surplus of money) that currently levels similar to those of 2015. The monetary base and the M1 rise respectively to 10.5% and 12.7% of GDP, which exceeds the amount of pesos that economic agents wish to require and that the economy must "work" with the current level of activity. 19659013] This surplus of money will be "cleansed" by "good" or "bad". For good it would be by the nominal way, with a BCRA buying the excess of pesos via the sale of reserves. But it is forbidden in the agreement with the IMF. Without "cleaning" for the "good", it will eventually be cleaned up for the "bad", which is via more devaluation and inflation.
This cleaning is already underway and is on the other side of the decline in demand. . The dollar recorded a record of 57%, doubling the devaluations of 2016 (30%) and 2014 (29%). Inflation has accumulated 16% in six months. There is a drop in the monetary base (heavenly bars) and Lebac (green bars) in real terms, which leads to an increase in demand for the dollar and the exchange rate (red line).
If the monetary base continues to grow nominally at the current rate and increases by +200,000 MM by December, inflation of the Central Bank and EMN (+ 30% yoy in December 18 ) It is optimistic and insufficient because it implies an increase in demand for money, which is totally inconsistent with the current macroeconomic reality for which the activity should fall.
In conclusion, all badysis shows that ] inflation should end up being higher than BCRA and REM estimates. We can not completely reject the new rounds of "bullfighting". In this sense, it must be remembered that higher inflation feeds the decline in demand for money and the race against the dollar . In this scenario, the probability that inflation exceeds the upper limit of the tolerance margin of the goal with the IMF can not be eliminated.
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