For the Central Bank (BCRA), As monthly inflation slows, the role of the crawling peg began to change and went from being an anchor to become an inertial factor. This was stated by the vice president of the monetary regulator, Vladimir Werningand said this means that, instead of containing price increases, it now contributes to inflationary inertia.
Based on the slowdown in inflation, the market speculates about when the Central Bank could adjust the crawl to a level less than 2%. “That crawl was an anchor. Today, as inflationary expectations converge towards it, “It acts more as a factor of inertia,” said the official. Thus, he sought to quell doubts regarding whether the Government will decide to reduce the pace of daily microdevaluations. That is a topic that began to circulate in recent days in the city.
At the Capital Market and Corporate Finance Symposium of the Argentine Institute of Finance Executives (IAEF), which took place this Tuesday, Werning explained that the strong exchange rate adjustment that the Central implemented at the beginning of the current government was an essential measure to stabilize the economy.
“We made a strong exchange rate adjustment. Some said it was too much and then we gave certainty to the outlook with a fixed crawl,” said Werning.
Furthermore, he spoke of capital market and the impact of the economic program on the reactivation of the local economy. According to Werning, the accumulation of reserves and fiscal adjustment have been crucial elements to stabilize the economic outlook. He highlighted that it was possible to accumulate almost US$2 billion reserves in recent months, a data that, he said, “demonstrates the effectiveness of the policies implemented to recover the liquidity of the financial system.”
Reserves and the need for pesos
Likewise, he highlighted the remonetization of private credit as another achievement. He explained that, as inflation decreases, the demand for money by the private sector begins to grow, which is a positive sign for economic recovery. Werning outlined the possibility that Central Bank reserves grow by US$10,000 million in the coming months, thanks to the reduction of banks’ cash liquidity.
He explained that the banks keep close to the 40% of your liquidity in casha level that could drop to 10%as happened after the previous laundering and that will free up resources towards the Central Bank’s reserves. And he trusted that this increase in reserves would strengthen the country capacity to sustain the economic stabilization program, which will provide greater room for maneuver in the face of possible exchange rate pressures.
Fiscal deficit and commercial account
Regarding the fiscal deficitWerning argued that achieving and sustaining a zero deficit It is a key objective to consolidate economic stability. And, on the other hand, he added that the Central Bank sought remove informal restrictions that limited access to foreign currency for the private sector in order to normalize the current and commercial account. He explained that, until last December, imports were paid only in a 20%while now they have restored to 100%.
Source: Ambito
