Javier Milei He spoke again about the departure of the exchange rate and revealed the three conditions that must be met to exit the exchange rate trap in 2025. In addition, he anticipated what type of scheme the Central Bank will adopt in the exchange market, key for economists.
“Evolution is already more important than in Convertibility, the most successful economic program in Argentine history. This program is better and much more consistent because it is built from fiscal balance,” he began. He insisted that his plan was achieved without prior hyperinflation: “without an expropriation like the Bonex Plan, “We did not carry out price controls, without fixing the exchange rate and recomposing rates,” expressed the first president.
On this point, he remarked: “the program generates induced inflation of 2.5% monthly. To the extent that we repeat another month with inflation around 2.5% monthly, it enables us to lower the crawling peg to 1%. There we are going to have a target inflation of 1.5%. If that persists, we are in a position to go somewhere already linked to clean flotation and if we solve the Central Bank stock problem and the monetary base in the traditional format coincides with the broad monetary base, “We are in a position to open the trap.”
“Those three goals must be met so that we can open the trap knowing that it will not generate instability in the demand for money. That is the central axis. We already have less inflation than the world, because you take out the crawl and we would be in deflation”, he completed in dialogue with Forbes.
Exit from the exchange rate: what is the “clean” float?
The term clean flotation, also known as independent flotation, refers to the situation of currencies whose exchange rate depends solely on the currency purchase and sale transactions that occur in the market. The central bank does not intervene at any time.
Instead, a “dirty float” occurs when a government’s monetary rules or laws affect the price of its currency. With a dirty float, the exchange rate can fluctuate on the open market, but the Central bank can intervene to keep it within a certain range or prevent it from continuing an unfavorable trend.
What he said about the direction of the economy in 2025
Faced with the arrival of 2025, Milei assured that he dedicated a large part of his work to lowering the inflation left by Alberto Fernández’s government, and promised to continue with deregulation.
“In December we received inflation traveling at 54%, equivalent to 17,000% annually. The last data was 1.4%, that is, a little more than 15%. We substantially lowered the inflation rate,” he reviewed.
“At the same time, we have a crawling peg, with 2% monthly plus international inflation, which today says that in terms of wholesale inflation we are at a rate of deflation of 1% monthly. When the crawling peg is cleared, there is deflation in Argentina of 1% monthly, that is deflation of 13% annually. You can tell me that the consumer is 2.4% OK, almost in line with the crawling peg, that is, zero inflation. I decompose the CPI between goods and services, where services are very strongly impacted by tariff adjustments, inflation for goods comes to 1.6% and inflation for services comes to 4.4%,” he developed.
The president assured that he will continue “removing regulations” and detailed that there are “3,200 pending” to be discussed when the ruling party has a majority in Congress.
“We are going to advance in a privatization agenda and in a deepening of the labor reform. As the labor reform emerges, we can advance in a pension reform.
In addition, we are going to eliminate about 90% of taxes -not collection-, “With which we are going to go to a system that has no more than six taxes”he emphasized.
Source: Ambito
