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The keys to the Economy announcement about the new stage of monetary policy

The keys to the Economy announcement about the new stage of monetary policy
The keys to the Economy announcement about the new stage of monetary policy

The Minister of Economy, Luis Caputoannounced this afternoon, together with the president of the Central Bank, Santiago Bausili that the economic plan enters in a second stage, which seeks to reduce the interest paid by the Central Bank. Subsequently, In a third stage, the exchange rate would be lifted. The Government confirmed its quest to achieve zero emissions, an objective that is in addition to zero fiscal deficit.

Second stage of the stabilization program

It was announced that the BCRA will stop issuing money to finance its remunerated liabilitiesas part of the second stage of the stabilization plan that the Government intends, said the Minister of Economy, Luis Caputo. “We want to provide greater certainty and greater solidity so that in some way there stops being anxiety about when the exchange rate trap will be released.”he said in reference to the current restrictions for the Argentine exchange market.

We are going to replace the liabilities of the BCRA with those of the Treasury and it will be the Treasury that will pay the interest. The BCRA will continue to manage monetary policy, but it no longer suffers the consequence of the movement in the interest rate resulting in higher monetary issue. These movements will end up in greater treasury debt. That is, The Treasury is double committed to its fiscal performance“said Bausili, head of the national financial organization.

In this regard, he considered that The decision “returns autonomy to the BCRA, which can set the interest rate” without worrying about the damage it may cause to its own balance.” The official hoped that he could “move comfortably to a positive rate in real terms and the only thing it does is bet on a macro balance that will be supported by fiscal performance. This is the tool that the BCRA has to focus on its main objective: eliminate inflation“.

With the aim of reducing monetary issuance to a minimum, The BCRA will transfer the paid debt to the National Treasury, that will open a process of attracting external financing that will allow us to face the responsibilities that expire in the short term. There will be a monetary regulation letter that banks will access to place their excess liquidity“, he said.

Interest rate and reserves

“Agents will be seeing the strength of the peso based on the Treasury’s commitment to comply with the zero deficit,” said Bausili. He explained that the second stage of stabilization “returns autonomy to the Central Bank, because You can set the interest rate without worrying about the damage it may cause to your own balance sheets. “The conflict of interest is over.”

Besides, He considered it “reasonable” that the interest rate would go, with these measures, “into positive territory in real terms.” He anticipated that talks with the banks will begin on Monday and announced that in the next two weeks specific regulations will be published to put this “second stage” of the economic program into operation.

Regarding reserves, Bausili said that it was expected that reserves would be lost from June to September. “Within the stipulated program, a loss of 3 billion dollars was expected. It is normal. And in the third quarter they recover,” said the president of Central. He noted that as “winter came early” with the “colder May,” June’s numbers were negative, or a virtual zero.

Third stage of the stabilization program

The minister also insisted that “There is still no date for the lifting of the restrictions” and confirmed that The PAIS tax rate will be lowered once more money begins to come in due to the tax reform.

We are going to lower the COUNTRY Tax, as we said from day one. “It will happen as soon as the Ley Bases is regulated and implemented and the Treasury begins to receive the income from the fiscal package. It will probably be between August and September,” they explained.

International Monetary Fund

The Minister of Economy, Luis Caputo, This afternoon he avoided specifying how much money Argentina will ask the IMF for in the next agreement and noted that the negotiation “has just begun.” Caputo also highlighted the statement issued by the Monetary Fund to highlight the approval of the Bases law and the tax park.

Official dollar, blend dollar, devaluation or crawling peg?

In addition to these announcements, they gave some forecasts regarding the dollar. A new devaluation of the official dollar was launched, and it was announced that they will continue with the “crawling peg” at 2% monthly, in addition to maintaining the “blend” of 80-20 for exporters. The exchange rate restriction would only be eliminated in a third stage.

Source: Ambito

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