The report that was circulated yesterday Wednesday after noon among officials of the economic team cleared up the few doubts that still existed among economists: August inflation closed at around 7%, above the preliminary estimates that had been made in the cabinet.
The most worrying thing is that the food category would have ended August with increases above the average, according to the information handled by the officials themselves. That is food inflation was above 7%always according to the monitoring of “high frequency” prices that follow in the economic team.
With these records in his possession, Miguel Pesce would decide, together with the rest of the Board of Directors of the Central Bank, a new interest rate hike.
“The decision is to maintain positive rates, above inflation,” a source from Sergio Massa’s team told iProfesional.
When would the fixed term rate rise?
The last adjustment of interest rates left the return on fixed terms at 5.8% per month. Clearly behind the 7% that August inflation would leave, if the official evaluations are met.
It is not expected that the adjustment in the cost of money will happen at the BCRA Board meeting this afternoon. The key will happen next Wednesday 14when INDEC releases the CPI for August.
Given the high inflation, the Central Bank can continue to raise rates.
Prices and the reopening of joint ventures
In the event that inflation of 7% is confirmed for August, the accumulated inflation in eight months of this 2022 would already amount to 56.4%. Very close to the wage guideline signed by the main unions in the country for the entire year.
For this reason, now most of them bid for the reopening of negotiations. Some guilds have already achieved it, such as the UOM and Commerce. They were able to anticipate increases that they had planned for the coming months.
The question, from now on, is whether the Government will enable the reopening of all negotiations -something that the CGT demands- or if it goes for the granting of a fixed sum bonus (the possibility of $30,000 is mentioned), as requested by the Kirchnerism.
Inflation complicates Massa
Together with the weak capture of dollars for the reserves of the Central Bank, the inflationary acceleration cloud Massa’s plans.
One issue is linked to the other: the Central Bank cannot collect dollars but it cannot devalue the peso more rapidly -to tempt exporters to liquidate their foreign currency- because that dynamic would accelerate the inflationary process even more.
In this regard, there is an open negotiation with the cereal companies to enable them for a month a special regime to be able to obtain $200 for each dollar they settle at the Central Bank window.
The spike in prices puts the economic team on alert.
An agreement for the dollars is urgent
The shortage of foreign exchange worsens the price scenario. Without being certain of the dollar price at which they will replenish their inputs or products, companies have no choice but to “remark just in case”.
They do not know the replacement value of the merchandise they sell. And for the same reason they prefer to accumulate stocks rather than sell. Or they directly put a higher margin on their merchandise to cover themselves from a devaluation.
Monetary squeeze in sight
Since taking office a month ago, Massa has accelerated the upward trend in interest rates. He wants the cost of money to be above inflation.
In two weeks, the BCRA raised the reference rate by around 20 points. The last adjustment was in mid-August. The Leliq rate went to 69.5% annual nominal, which placed the Annual Effective rate at 96.8%. In turn, the return on fixed terms went to 5.8% per month.
It is clear that if a confirmed inflation close to 7% in Augustthose indicators will have become outdated and a correction will be necessary.
Inflation in August, led by food, was also pushed by other items, such as the 40% increase in public transport and mobile telephony (some companies increased their subscription by 19%).
Prices: August would have ended with above-average food inflation.
Inflation: September started badly
As iProfessional has already posted, the main food manufacturing companies sent new price lists with sharp increases to their customers, supermarket chains and wholesalers.
The increases average 7% to 8%, which gives an idea of the inflationary temperature that will take place next month.
The increases cover practically all the products of the basic food basket: noodles, rice, sugar, flour, oils, dairy products and canned vegetables. Also non-alcoholic drinks.
In principle, the leading companies do not have any additional massive markups planned, beyond some punctual correction that arises in the middle of the month in some sensitive items -such as oils or coffee-, which are tied to the situation of prices at global level.
This first adjustment in the price lists puts you a new floor for food cost inflation for next month. To have a comprehensive picture, it will be necessary to monitor the evolution of other foodstuffs on the family table, such as meat and dairy products.
This dynamic of continuous rises in food is Sergio Massa’s greatest concern. However, no measures have yet been announced by the Secretary of Commerce, Matías Tombolini.
Unlike the previous efforts in Commerce, Massa and his team distrust the controls.