the difficult plan B that evaluates the Central Bank

Inflation and inefficiency in the fight against this scourge remain one of the main problems revealed by the government, which must disseminate a set of instruments to stimulate consumption, to fight against the recession and to revive the political initiative.

The set of announcements, designed as a result of the decision of the Central Bank to freeze the exchange rate until the end of the year, seeks primarily to reverse the social bad mood by the continuous rise in prices.

The index has finally evolved around 12% in the first three months of the year, with a worrying level of 4% expected in April. At this rate, the government knows that it is condemning a new 40% inflation year, according to the latest calculations of private consultants, which could also adjust upward with a minimum of change.

Finance Minister Nicolas Dujovne has acknowledged that the percentage for April will be "higher" than in previous months.

"We are leaving behind the instability of exchange rates with which we lived very hard last year, which largely explains the so high inflation we experienced in March and April," he said. said the manager.

But the price issue also concerns, and many other areas, such as the case of the Central Bank. Beyond the new measures launched by the entity – a new slap for the monetary program, the truth is that in the environment of Guido Sandleris and think of a plan B if that does not work either.

The first to hear were some bankers and investors who met face-to-face with Central and Treasury officials who attended side events at the IMF and World Bank meeting in Washington.

In one of these ultra-reserved conclaves, the Central Bank delegation (composed of Sandleris, Vice President Gustavo Cañonero, and Chief Economist Mauro Alessandro) sent a clear message of resistance against Inflation: "No matter what it takes" or Spanish, "all that is needed".

In the midst of the reserved talks, officials at the BCRA have argued that if prices do not begin to fall after May, they do not rule out tougher measures. On this list, they said, there would be the idea of ​​further reducing the amount of money in the economy.

As he knew iProfessionnelthere has been talk of negative growth in the money base (defined by the amount of notes and coins held by the public plus deposits in pesos by the BCRA banks).

This means that Sandleris would be willing to withdraw more pesos in nominal terms (which are no longer real), which would worsen the liquidity shortage, raise interest rates and further complicate the exit from recession.

In this way, The plan to dry up the Plaza de Pesos – with annualized inflation above 50% – would be the last card to stop all-or-nothing prices.

But this would be an extreme measure, precisely because it would eliminate liquidity at the cost of a rise in interest rates (or more). There is virtually no example of a country that, with such high inflation, has reduced its monetary base in nominal terms.

We will have to return to Uruguay in 2000. In the midst of the crisis of those years, contaminated by the Argentine default, the president of the Central Bank of Uruguay, Julio de Brun, who managed to raise rates above 100%, has achieved an index of 10% price with a monetary base. negative in nominal terms.

Of course, to suck up more pesos in the middle of a much higher price increase, as in the local case, is another thing.

Self-criticism for "laxity"

Whatever the case may be, the central bank currently has a zero growth pattern of the monetary base until December, which was even surpbaded even though it was a big deal. a very restrictive policy.

As a result, the average monthly target for the base is $ 1.34 billion and in March it was over $ 29,000 million (2%) over the new target. But it has not been enough for inflation to decline.

Between the comings and goings that the plant's strategy had since the takeover of Sandleris, the entity has raised the increase by seasonality to the base to keep it "constant" and without updates.

After being more "lax" in December – which even Sandleris acknowledged last week – the power plant realized that it was not easy to control money demand and its influence on the prices of goods and services. dollar.

Another tool in the BCRA that they consider a "mastery" of prices is to approve and encourage greater currency appreciation. Having run from the purchase of dollars when that pierces the ground of the non intervention zone (ZNI) goes in that direction.

Sandleris believes that phenomenal monetary pressure and a drop in the currency – even a transitory one – could help to "deflate".

Thus, he continues with the scheme that "without pesos there is no way to buy dollars". In this sense, they calculate in the plant that the potential electoral dollarization will not be so disruptive, which, if achieved, will help contain inflation through the famous "relay", that is, the transfer to the prices of the greenback's increase.

How do they do the accounts?

– Dollarization in 2018 accounted for about 12% of total badets in pesos. Taking into account the dollarisation that has already taken place, an equivalent figure for the remainder of 2019 would represent approximately 7,000 million US dollars.

–The Treasury will auction $ 9,600 million to fund its peso needs over the next eight months. As a result, green bills are reaching.

– Families have already dollarized their wealth (93% today versus 83% in early 2018).

Banks and other financial sector institutions have restricted their holdings of foreign currency.

-The badets in short-term pesos (maturing during the calendar year) by non-residents rose to more than 20,000 million USD in 2018, compared to about 5,000 million USD this year.

"The BCRA has humbly admitted to our audience of investors that the outlook for inflation is proving much more difficult than expected, but the authorities have remained firm in their message that they will all that is necessary to promote financial stability and force disinflation, "reads an internal document issued by one of the investment banks inviting central government officials and approved by iProfesional.

"Financial stability and, more specifically, the nominal exchange rate and its effect on inflation, continue to be the main priority of the administration of Macri and BCRA," said the US entity.

And they added: "The authorities have acknowledged that inflationary inertia has proved more stringent than expected, with rising wages, delayed indirect effects and higher regulated prices, which are the main factors of excessive inflation. "

In another pbadage of the exclusive newspaper to its customers, they note that officials believe that a more explicit slowdown in the pace of consumer price inflation "will only begin to materialize from the start of the year. ;April".

Despite the optimism that Sandleris wanted to imbue during his last press conference at the IPOM presentation, phrases like "inflation is a transient phenomenon" and that "he has very little left way to go down, "privately they have confidence and they are already evaluating a plan B high impact if the speech does not return to work either. All or nothing.

Discover the latest news in the digital economy, startups, fintech, business innovation and blockchain. CLICK HERE