Official dollar: how long can the crawling peg of 2% per month last, will the exchange anchor work?

As the economist points out Christian Butler“he official dollar runs at the pace of devaluation of 2% monthly and that works like exchange anchor, inflationary for now given that it is a fairly stable level of evolution, especially taking into account that prices have a much greater upward trend.”

The BCRA strategy for the official dollar

In principle, it could be said that a exchange rate jump higher than expected (a type of overshooting), in order to give an initial shock and with slight mobility that allows it to function as exchange anchor. However, given the evolution of inflation, the market doubts whether it will really meet this objective and how long it will last.

“How much can be maintained, It will depend on the decision made by the Government about it because there is a very strong trap in Argentina today and that means that they can sustain the price they want because adjust by quantitythat is it is controlled by not letting anyone buy“, says Butler.

For its part, Alejandro Giaccoiaan economist at Econviews, believes that, “unless the CCL is escaped and the government does not want the gap to increase too muchit is expected that, during January, he will try to continue keeping crawling at 2% monthly as usual”. However, he warns that he probably won’t be able to continue much longer if he doesn’t want to lose everything he gained with the initial devaluation.

Does it hold up to the 2% monthly crawling?

And it is that The Government managed to set an official exchange rate that reduced the gap with parallels to around 20% and, thanks to this strategy since maintains the import trapis managing to buy dollars in the official market on BCRA. However, Giaccoia does not rule out that, “At some point it will have to start devaluing faster”.

“In line with what was announced, the crawling should adjust 2% monthly, at least, in the first months. I don’t know if that’s effective for function as an anchortaking into account what happened previously,” he says Gustavo Quintana de, PR Exchange Operators on the same line. And the previous Government implemented a similar strategy with the objective of control inflation, but that strategy was not successful.

Because? Because as stated Butler, “The problem is that, with a 30% inflation in December, 20% or 25% in January and of 10% in Februaryexchange delay is generated and, although carrying the dollar at $800 was a price of overshooting, With this inflation it is already short.” Thus, he does not rule out that, in March, a new devaluation could be applied.

Dollar: how the official strategy will continue

However, consider that it is not the only way. “The alternative is that the crawling peg is greater than 2%for example, 4%, 6% or 8% monthly, but if that strategy is followed, the anchor is smaller”says Buteler.

In the same sense, Quintana doubts that Milei’s management will be able to maintain this strategy over the months. “I think that the exchange rate adjustment will at some point abandon 2% and, surely, we will go to a market with greater fluctuation and an adjustment more in line with reality“, says.

And, Buteler points out that “the disorder of the economy is very high and That suggests that it will not be enough. in time as the only anchor.” For Quintana, You can maintain this strategy for a few more monthsbut hopes that the Government will have to abandon the 2% crawling after the first two months, when they see if all the adjustment that was applied in fiscal matters as a central inflationary anchor worked, given that the exchange rate is a complement to that strategy.