The official leadership doubles its bet on drying up the peso market. “The intention of the Central Bank (BCRA) is to reduce the amount of money by – at least – 2.5 billion pesos”a high-ranking government source told Ambit.
It should be noted that last month the monetary base totaled 3.4 trillion pesos, mainly due to the dismantling of remunerated liabilities within the framework of the migration of debt to the Treasury.
The authorities plan to absorb these 2.5 billion pesos through Sales in the Cash Settlement Market (CCL)the source told this media. When asked about when the measure would be implemented, the answer was that “there is no specific time frame, but it will be In the next weeks”. The official intention is to lower inflation and therefore reduce the exchange rate gap with the ultimate goal of ending the currency controls.
As often as possible, President Javier Milei clarifies when the conditions for lifting the currency controls will be met. “It is necessary to have the macroeconomy in order” although he also clarifies that “we closed the fiscal deficit, the puts are a problem and on Wednesday we will give them a solution. So, as you put the macroeconomy in order, the inflation rate will begin to converge with the devaluation rate.”
This weekend, Milei and the Minister of Economy, Luis Caputoannounced a deepening of the monetary strategy by communicating that There will no longer be the issuance of money through the purchase of dollars in the official exchange market (MULC).
It was reported that the pesos issued in this way will be reabsorbed (sterilized) through the sale of dollars in the CCL market. Once this source of issue and that of the puts have been eliminated (an agreement with the banks is expected to be reached in the middle of this week), The monetary strategy will consist of keeping the expanded monetary base constantthat is, the total stock of liabilities in pesos of the Central Bank.
Goals
In the markets, it is interpreted that the official decision aims to “kill two birds with one stone”, since, on the one hand, reaffirms the policy of not issuing money – with the aim of continuing to reduce inflation – and, on the other hand, it is oriented to increase the supply in the CCL market and thus curb the rise in financial dollars.
In this context, this Sunday it was learned that The Ministry of Economy will purchase from the Central Bank the foreign currency required to meet the full payment of interest on the Globales and Bonares bonds maturing in January 2025.
This operation will be carried out with part of the pesos corresponding to the financial surplus achieved in the first half of the year, which accumulated to 2.3 trillion pesos as of last May.
According to official information, the amount of 1.528 billion dollars will be deposited in the trustee, Bank of New York, and will be available only for use for the aforementioned purpose.
In the markets it is interpreted that this announcement will play in favor of the price of Argentine debt bondsafter several days in which the country’s risk increased – it exceeded 1,500 basis points -, with financial dollars rising and the exchange rate gap exceeding 55% last Friday in the CCL.
This deepening of monetary policy has been discussed with President Javier Milei and the economic team for several weeks. The announcement was finally made by the President himself on Saturday in a television report and then the Minister of Economy, Luis Caputo, gave more technical details in a radio interview.
The response to these measures, as always, will come from the markets.
Source: Ambito
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