January starts with bad news
Consumer price inflation in December was 3,8% up from 2,5% in November and the prospects for January are still worse. The monetary base has been expanding at 12% per month since the beginning of December. The Central bank has increased the interest rate and the pace of adjustment of the official exchange rate but timidly, still much below the rate of inflation. After the meeting of the Economic Minister with governors and some parliamentarian leaders, the expectation of an agreement with the IMF in the course of the first quarter waned. It became very clear that the government has decided not to commit to a stabilization plan because it considers that a fiscal adjustment would interrupt the strong recovery of the level of economic activity currently under way. The risk premium jumped from 1.703 by the end of December to 1.835 on January 12. The uncertainty about what will happen during 2022 has increased. Conflicting opinions within the government and even within the opposition on how to address inflation and loss of credit, do not help in creating at least some favorable expectations for the medium term.