2026/03/20 | Diego Ciongo & Soledad Castagna
At today's monthly Monetary Policy meeting, the BCP unanimously decided to keep the policy rate unchanged at 5.50%, maintaining a neutral monetary policy stance. The decision was in line with our call and market expectations, as the escalation of the Middle East conflict has driven a sharp increase in energy prices. This decision follows two consecutive 25 basis point rate cuts implemented in January and February.
The Committee highlights that economic activity continues to expand, albeit at a slower pace due to a high comparison base. Inflation remains low, mainly driven by subdued goods inflation. Current projections indicate that annual inflation will remain temporarily below target before converging to the 3.5% objective by late 2026. External risks remain centered on international energy price developments, which may continue to affect domestic fuel prices. After today’s decision, we estimate the one‑year ex‑ante real policy rate at 2.00%, remaining within the BCP’s neutral real interest rate range (1.3%–2.6%).
Regarding the external scenario, the escalation of the Middle East conflict has triggered a sharp rise in energy prices, driven by supply disruptions and heightened uncertainty. Oil prices have moved above USD 100 per barrel. Agricultural commodity prices—soybeans, corn, and wheat—showed recent volatility with moderate increases. Global financial markets have turned more volatile, with a stronger U.S. dollar and higher long‑term U.S. Treasury yields over the past month. Moreover, the MPC added that they will continue to monitor the evolution of international energy prices, as they could continue to generate pressures on fuel prices.
Our view: We see no further rate cuts in the near term. We see limited scope for additional rate cuts while geopolitical tensions in the Middle East continue to exert upward pressure on Brent prices, reinforcing inflation risks at the domestic level. The next monetary policy meeting is scheduled for April 21.