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Montevideo, September 22nd 2018 - 17:03 UTC

Argentina central bank leaves basic rate unchanged to combat inflation

Wednesday, March 14th 2018 - 09:15 UTC
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The Central Bank confirmed its policy of supporting the Argentine Peso with occasional interventions in the money exchange market The Central Bank confirmed its policy of supporting the Argentine Peso with occasional interventions in the money exchange market

Argentina's central bank left the basic interest rate unchanged at 27.5%, a clear signal that inflation remains the main challenge of the country's monetary policy. The bank also revealed that last week it intervened in the local market with 400 million dollars to keep the US dollar in the range of 20/20,50 Pesos to the greenback.

Estimates for February indicate that inflation in February will be higher than in January, mainly because of the increase in regulated prices and for some tradable goods, the bank advanced in its report.

However the acceleration is temporary and once most corrections in public service rates is completed (power, water, phones, liquid gas), and money exchange market dynamics eases, “inflation will consolidate its downward tendency”.

Likewise the pronounced depreciation of the Peso during December, and lately, continues to prevail showing some weakness.

In this context the Central Bank will continue to intervene in support of the currency, convinced that under current conditions, a greater depreciation is not justified, neither because of real economy impacts or the course of monetary policy, and if not avoided it could have the potential of slowing down the process to take inflation to target.

Thus the “Central Bank ratifies its floating currency policy with occasional interventions, as a complement of the monetary policy, to avoid dynamic disruptions capable of altering the inflation objectives or generating negative effects for financial conditions”.

Categories: Economy, Argentina.

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  • Enrique Massot

    Gradually, it becomes clearly irrelevant for the current Macri government to blame “the heavy legacy” of the previous government that ceased over two years ago.

    Even the alleged corruption of the previous government is getting worn off, as denunciations for the use of offshore tax havens for the purposes of capital flight, tax evasion and money laundering are now hitting members of the president's inner circle as intelligence chief Gustavo Arribas, accused by the Brazilian police of receiving $850,000 as part of a money-laundering scheme.

    Let's remember that Macri had anticipated a “deluge of investments” as a result of Argentina's “return to the world.”

    Instead, the only capital going to Argentina now is to make short-term investments on high interest rates the government pays on peso-denominated debt instruments known as Lebac.

    Meanwhile, opening wide the doors to imports has zero effect on high local prices as the government intended--instead, the national industry is rapidly shrinking and complaints of representatives has been scoffed at by government officials.

    In a nutshell: A remake of the economic approaches taken in the 1970s and 1990s with a known and sad end.

    Mar 15th, 2018 - 05:08 am -1
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