The IMF and the market insist on the need to accelerate the pace of monthly devaluation of the official dollar, but the Government resists doing so and officials defend their position.
He International Monetary Fund (IMF) pressures the Government to adjust the official exchange rate, which has been evolving at a rate of 2% monthly since December of last year. This is what the organization expressed in its Review Report of the first quarter of the year, which is the 8tva. Ongoing program review.
Although the Government assures that it does not need to make changes in its monetary policy despite the fact that a large part of the market tells it that it must do so, given that inflation runs above the exchange rate, the IMF indicated that “to sustain progress it is necessary to improve the quality of fiscal adjustment, take initial measures to improve the monetary and exchange rate policy framework and implement reforms to unlock growth, formal employment and investment” and highlighted that they coincide with the intention of ““lift the trap as quickly as possible, but without taking risks that jeopardize the stabilization scheme.”as the Government expressed it.
The BCRA’s defense of the evolution of the official dollar
However, the new director of the Central Bank (BCRA) Federico Matías Furiasea man close to the Minister of Economy, Luis Caputo, and the president of the monetary regulator, Santiago Bausili, came out to defend the Government’s exchange rate strategy. He did so through his social network account X (ex Twitter), where he said that “as of 5/31/24, Real Multilateral and Bilateral Exchange Rates with the USA are 22.6% and 24.6% up (i.e. more depreciated/competitive) vs the levels of 12/12/23″
Likewise, he pointed out that this is combined with the fact of having achieved twin surpluses, with the improvement in the BCRA balance and a lower country/gap risk.
The basic basket, another argument of the Government in favor of the 2% crawlig peg
Not content with that tweet, Furiase doubled down by pointing out in another tweet that the fact that, in May, The total basic basket, which is used to measure poverty, rose 2.8% (vs. 4.2% of the CPI), the lowest record since the end of COVID is “a good argument in favor of the macro consistency of the 2% crawl and the resulting real appreciation, in the context of a drop in nominal value, fiscal surplus, (real) collapse of the broad monetary base and improvement in the BCRA’s balance sheet.” In addition, he highlighted that real appreciation as a redistributive policy has the greatest effective since 2017.
He did it through reposting a message from another user’s tweet that highlighted the aforementioned data on the basic basket that the Government published. And, in this way, he made it clear that the BCRA will insist on the pace of evolution of the crawling-peg that it has been implementing, even if it lags behind inflation, which has already accumulated around 75% so far this year and of the monetary policy rate, which is 3.3% monthly, although the Government seeks to consolidate the Lecap rate, which is 4.2% as the reference rate.
It seems that 4%, in line with that rate and with May inflation, which was 4.4% monthly, would be a more appropriate rhythm of daily microdevaluations than the current 2%but the BCRA shows time and time again that it has no intention of moving forward with an acceleration of the pace nor with an abrupt devaluation.
Source: Ambito
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