Publications

The Central Bank increased the interest rate by 100 basis points to 11.25% due to persistent core inflation and high inflation expectations. The decision was divided with 4 members supporting the increase.

For a second straight meeting, the Fed held rates steady last week at a 3.50-3.75% target range, flagging renewed inflation risks tied to the Middle East conflict—now priced in by markets through higher medium- and long-term yields.

Argentina enters 2026 with further progress in macroeconomic stabilization, supported by fiscal balance, prudent monetary policy and greater FX flexibility. Growth is expected to be moderate, inflation to decline, and the recovery to remain uneven, with challenges in employment, reserves and policy sustainability.

If inflation expectations remain well anchored, a pause driven by a supply-driven shock could prove counterproductive given policy lags, potentially leaving the stance tighter than desired once these pressures dissipate.

The FOMC will most likely keep the policy rate unchanged at 3.50%-3.75% while conveying a cautious approach in light of renewed risks; we do not expect a meaningful change in the median rate projection, even if inflation forecasts move somewhat higher.

In March, the BCRP kept its rate at 4.25% for the sixth straight month, as expected by the market. Higher inflation reflects three transitory supply shocks. Monitoring inflation expectations will be key to sustaining the current neutral stance.

Treasury yields declined following a softer-than-expected January headline CPI reading, which continued to indicate limited tariff pass-through. However, the inflation report also signaled that disinflation momentum in cyclical components has somewhat slowed.