The Central Bank moved first. As soon as the markets opened, the monetary authority validated a devaluation of the 22% and brought the wholesale exchange rate to $350. The measure has a double explanation: it is a reaction to the result of the STEP with the aim of appeasing the nervousness of an unexpected scenario and responds to the request of the International Monetary Fund (IMF) to narrow the exchange rate gap with parallel dollars. Behind the shock electoral, the concession of the Minister of Economy, Sergio Massato the credit agency represents a high-risk gesture that will have a direct impact on prices.
as far as he could tell Letter Pthe intention of the monetary authority was advance the devaluation planned for the near future and keep the price stable over the coming months. They don’t say it, but October would be the goal. In parallel, the interest rate paid by banks for fixed terms in pesos increased by 21 percentage points, bringing it to 118% per year. The Annual Effective Rate was 208% and the monthly effective 9.7%.
This represents a change of strategy: throughout the government of Alberto Fernandez, the Central made daily microdevaluations in the midst of strong exchange restrictions to avoid large jumps. Since the signing of the technical agreement with the Fund, the strategy of crawling peg accelerated and, with the push of this Monday, the depreciation of the peso is similar to what is suggested by the credit agency, between 15 and 25%. Thus, the gap with the blue shrank from 110% to 92%, although a day of tension is expected in the Buenos Aires square. After 2:00 p.m., the illegal currency was sold for $695 in the downtown caves, about $90 more than last Friday. For now, there will be no changes to the taxes associated with operations.
Impact on inflation
In the market they speculate that the head of the Treasury was saving the devaluation so as not to affect their own electoral performance in the PASO and to give a signal close to the meeting of the board to unlock disbursements. In fact, the IMF came out to support the measure hours after it came to fruition and announced that on August 23 there will be a meeting of the Board of Directors to discuss the changes foreseen in the Staff Level Agreement.
Weeks ago, it had allowed an increase in exchange rates through fiscal means, taxing imports with the COUNTRY tax. The effect of this measure will be added to that of this Monday since such a sharp rise in the wholesale currency has a concrete transfer to the prices of food, fuel and energy that are referenced in that price. Although official sources say that the growth of profit margins of price makers created a cushion so that they are in a position to absorb this new exchange rate without generating a transfer to prices. With this premise, the Secretary of Commerce must negotiate, Matthias Tombolini, the program of Fair Prices expiring this Tuesdayto give continuity to price control.
