The last few weeks have been very conflictive economically. Faced with this, the government had no alternative but to tighten the trap even more. Something interesting to note is that the dollar is still behind if one were to compare it with the evolution of the monetary base.
Despite the recent rise, Has the dollar been beating inflation this year? Not at the moment, although everything seems to be happening soon.
Since Alberto Fernández took office, How was that race between the “free” dollar and inflation?
If we analyze the accumulated since Alberto Fernández took office, the dollar rose approximately 240%. In contrast, inflation totaled 178%, taking into account the June estimate.
In this graph you can clearly see the dynamics of 2022. The distance between the two was shortening as the dollar was falling and inflation accelerated. However, in recent weeks you can see how the green line (dollar) gained momentum and took advantage again.
Central Bank measures
Faced with the impossibility of expanding international reserves and in the context of high energy import costs, the BCRA had no other choice but to take drastic measures. As usual, new restrictions and prohibitions were added.
Basically, the goal is for the companies finance their imports with their own dollars, in order to “take care” of the few dollars that the country has. The aim is to prevent companies from importing speculatively, taking advantage of the value of the official dollar, which is worth less than half that of “free” dollars.
This is a new trap, a measure revered by the ruling party. Obviously, it had immediate consequences: since practically no one could access the official dollar to import, the BCRA was able to accumulate more reserves. He bought US$250 million on Monday the 27th; US$150 million on Tuesday 28 and US$583 million on Wednesday 29, which implies a record since 2016. In turn, on Thursday 30 another US$536 million was raised.
Is it to celebrate? Clearly not, since they applied a “turnstile” in which almost no one can access the official dollar. Bread for today, hunger for tomorrow. Definitely, This new trap will have negative economic consequences, beyond the fact that, in the immediate future, the BCRA can recompose its reserves.
What happened in the free markets, after this measure? Country risk set a new record and the price of the dollar soared.
Can the dollar calm down? It’s a possibility, of course. Might take a break anytime soon, but then it will keep going up. Just look at the inflation and emission figures.
It is worth noting the following data: in June the BCRA issued $825,000 million, which implies higher future inflation and an assured dollar rise. In addition, the stock of remunerated liabilities (mainly Leliq) exceeded $6 billion, so it will have to accrue almost $4 billion in annual interest. Nice snowball, right?
How far could it go? At a minimum, and to match this year’s inflation, the Settlement Cash dollar could reach $275 in the short term. And to end of the year should easily exceed $300, if we take into account projected inflation.
The picture is terrifying on all fronts: economic, financial and political. The dollar is overheating and all the ingredients are in place to keep it flying.
To finish, I want to invite you to download for free a report that I prepared so that you can face this global crisis and have the tools to know how to beat the market. You can download it at this link.
CEO of Charter Finance
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
