Against inflation, with the same recipe | Guido Sa …

Central Bank President Guido Sandleris raised the profile last month. The Freedom Foundation invited him to a luncheon yesterday with economists and businessmen. In the event, the head of the monetary authority gave a speech very similar to that of the former president of Central, Federico Sturzenegger. Sandleris said that now, despite the fact that inflation is the highest in 30 years, the fundamentals were set to progress on a single-digit inflationary trajectory. Monetary authorities said the same thing in the first half of 2016. That year, inflation was 41%, it was 26% in 2017 and 49% in 2018. The central announced that It would strengthen the prudence of monetary policy until May by withdrawing further weight from circulation.

Sandleris has been in charge of Central for six months. Prices accumulated during the period increased by 25%. But the data does not intimidate him. "I am convinced that we have managed to establish a solid foundation to start reducing inflation in a sustainable way," said the manager. The plant owner used three arguments to justify this claim. "The real exchange rate today is 59% higher than the level it had before the stock exit in December 2015. The current account deficit for the fourth quarter of 2018 was 1.2%, while it had 3.8% over the same period of the previous year.And the rate delay is largely corrected.All efforts have been made. "

The president of the monetary authority is optimistic. Inflationary Inertia The attempt of different sectors of the economy to recover lost purchasing power in recent months. Dollarization in the face of political uncertainty. None of these points is an inflation problem. The official has tried to convey a simple message to the public: now that the economy does not finance the public deficit and loses less dollars for the external accounts, the internal market will no longer have any important reason to record the pressures on the public finances. price. This is an inaccurate reading to explain the problem of inflation. Macro data has a clear antecedent that makes the argument unconvincing. Inflation rose sharply in 2007. That year, there was no budget deficit or current account deficit.

The holder of the monetary authority is nevertheless convinced that the appropriate strategy is progressing. He proposed that the zero-emission system with money tapes orders the macro and that, sooner or later, it will eventually appease inflation by nearly 50%. "At the end of September, we launched a strict basic monetary target system, the station had lost its credibility and we decided to start recovering it," he said. He said that "the way to proceed was to provide the public with easily verifiable targets, which we achieved in the first few months of the program, and we will do so in February." Financial volatility has decreased with this monetary regime. therefore, even if they remain high, inflation and the interest rate have fallen, the monetary regime is strict and we are also applying it with great caution, which is what is needed for inflation decreases. "

Sandleris's speech was at noon. In the afternoon, the monetary authority announced that it would strengthen the prudence of monetary policy with greater absorption of the monetary base in the coming months. "The Central decides to maintain until May the over-achievement of objectives.This means that the basic goal between March and May is down by 43 billion pesos." This was not the only measure of the entity. The agency's technicians have modified the intervention strategy in case the dollar would come down to lower the floor of the exchange rate range. The entity will buy up to $ 50 million a day (up from $ 75 million now) and the maximum amount that can be purchased per month can not exceed 2% of the monetary base (as opposed to 3 currently).