The three reasons why Sandleris believes inflation will plummet

The President of the Central Bank, Guido Sandleris, participated this morning in an event of the Freedom Foundation. There, he delivered a speech about the bank's perspective in the fight against inflation and has shown optimism about the future.

Sandleris pointed out that over the last three years, the government had made progress in correcting the short-term shortcuts that had been used to contain inflation, for example to reduce the budget deficit.

"I'm not saying it was done at the right speed or with the best possible coordination, in fact, I do not think it was, but I'm convinced that we were able to build a solid foundation to start reducing Inflation, "said the manager..

For the BCRA's number one, the real exchange rate is now 59% higher than it was before the stock left. And the current account deficit for the fourth quarter (seasonally adjusted and annualized) is set at 1.2% of GDP, 3.8 percentage points lower than in 2017.

"The late rates, which, as we have said, was a widely used instrument until 2015, has been corrected for the most part, and the bulk of the effort needed to make rates honest. have already been made, "he added.

"Logically, if delaying the exchange rate and rates have short-term effects on controlling inflation, since these prices lead to identical transitional increases. But these corrections are necessary to reduce inflation permanently"he said.

On the fiscal side, according to the central bank's exposure, the primary deficit has been reduced from around 5% in 2015 to 2.4% of GDP in 2018. And there will be no primary deficit in 2019.

"In short, we have almost completely corrected the three macroeconomic imbalances that led to the economy: the exchange rate, the tariff and the budget deficit. As I said, this puts us in front of the possibility of a lasting reduction in inflation, "Sandleris said confidently..

On the other hand, he said that the maintenance of monetary discipline is essential. "The imbalances that have prevented the steady decline in inflation in the past are solved or are about to be, and we already apply a monetary policy aimed at reducing inflation," he said. he warned.

He also noted that the monetary regime is strict and that it is implemented with great caution. "This is what is needed to reduce inflation, we know that January data in this sense were not good and that there are still a few months with corrections of rates, "he said.

"Now, you have to be perseverant, knowing that the results are not immediate, but without a doubt, they arrive. This is evidenced by the cases of countries close to ours already accustomed to living with single-digit inflation. There is no reason we can not do it, "concluded Sandleris.

Inflation "very high"

Sandleris admitted that inflation in January was "very high", while he expected that in February it would also reflect a high level.

"Argentina has much higher inflation than almost every country in the region"said the manager, who stressed:" We did not arrive here as planned. The road was harder than we had imagined. "

In this regard, he acknowledged: "Beyond the specific factors that help to explain it, inflation in January, at 2.9% per month, was very high and it is very likely that the February figure is also high. "

"I am aware of the suffering caused by inflation among our citizens, especially the most vulnerable, and that is why reducing it is the main objective of this central bank", he said at the meeting of the Freedom Foundation.

According to him, "we tried" to solve this problem "by delaying the exchange rate", believing that only "could be effective in the short term".

"Both imported and exported products are becoming cheaper, inflation expectations are under control and results are emerging," he said.

However, he said: "The problem in the meantime, an imbalance of the external sector is generated, which is maintained while the rest of the world is willing to finance us, but which ends with a depreciation and a rise in inflation once financing cut.

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