On Monday, the Central Bank announced a 50 basis point decrease in its Monetary Policy Rate (MPR) and will now be 4%, a level not seen since 2017. This is the fourth reduction so far this year, representing a fall of 125 basis points, as a result of “threats” detected by the Central Bank that would bring inflation down.
The MPR is the rate that the Central publishes for the financial system to react, in the sense of raising or lowering the rates for savings and credit.
This rate will be the reference to calculate credits or savings certificates. If inflation is low, the BCCR lowers the interest rate to stimulate consumption to some extent, if inflation starts to rise and puts inflation targets at risk, the MPR will go up,”
said Malberth Cerdas, investment director of the Bullish & Bearish signature.
Keeping inflation under control is the main objective of the Central Bank and has set the goal between 2% and 4%. Currently the indicator is at 2.42%.
When inflation rises it means that consumers are demanding more goods and services, but when it stagnates or is negative, it is a sign that there is not enough purchasing power, or that the pace of consumption is slower.
In addition, with this decrease in the MPR, credit would also tend to get cheaper, seeking to reactivate the economy.