The Government has this week embarked on what could be considered phase 2 of the war on inflation. Phase 1 was announced by President Alberto Fernández on March 18 of this year, but it is possible that not even the head of the executive power himself remembers that declaration of war today. It’s good to forget: since then inflation has not stopped growing.
Now the fight against rising prices has resumed, in the form of cold War: a freeze for 120 days. At the forefront was Sergio Massa and, one step behind, the secretary Matías Tombolini. Together they put together an astonishing scene in the CCK, with the assistance of trade unionists, businessmen, mayors and even some militancy.
Among the many guests of the CCK, the absence of the Central Bank was noted, body chaired by Miguel Pesce. The BCRA has, in theory, a key role in defend the value of the currency -the weight- and therefore in the fight against inflation. It was surprising that in an event designed to curb inflation, the central did not have a place in the squad.
There was an agreement with manufacturers and supermarket chains. There will be an APP with which to check over the phone whether the “fair pricing” program is being respected or not and, as the Kirchner governments like, there will be a channel for complaints and fines. Popular control of inflation.
As always, Mayors will stand by, as they have unsuccessfully since more or less 2006, when inflation began to take off. This time they have the incentive to withhold a portion of the fine which is levied on the merchant caught at fault. It remained to say that this war -against inflation- “we won it together”.
But Massa has not forgotten the BCRA and dedicated a paragraph to it. It was when he said that government should be “balanced and orderly in spending” and, more importantly, “follow the process of not financing with the issue but on the market”. He also said you had to “build up reserves to strengthen weight”. Massa spoke in the handwriting of his deputy minister, Gabriel Rubinstein. Rubinstein, judging by his past tweets, does not believe much in what has been announced. But at least he managed to get his ideas about fiscal balancing and how to finance the deficit to be taken over by the economy minister. And said in public.
What is salient in Massa’s words – not financing the public deficit with a monetary issue – is what explains why the Central Bank was not invited to the CCK: the Central Bank, today, cannot do much in the fight against inflation because has to continue to finance the Treasury, one way or another. He’s practically tied hand and foot.: “If the interest rate goes up a lot, the monetary issue increases, because today it is paying the equivalent of 12% of the monetary base in interest every month for leliqs and repurchase agreements, i.e. the BCRA debt with the banks” underlines l ‘economist Federico Furiase.
And he adds: “But in addition, the Central also issues pesos per buy bonds in pesos in the secondary market, to support their prices and avoid making more expensive the debt placements that the Treasury must make more onerous”. For Furiase it is good that he does so, because if the bonds collapsed, the pressure on the dollar counted with liquidity would be more intense. And he summarizes: “Vista la tax domain -that is to say the ineluctability of the transfer of pesos to the Treasury by the Central Bank- of monetary policy, one cannot ask much more of the Central Bank”.
Gabriel Camano complements. “The amount of transactional money has decreased since the end of the pandemic, but the demand for pesos has not recovered. It is clear that the decline in demand for the peso is explained by the lack of anchoring of expectations: people expect the peso to lose value and no element of monetary or economic policy is working. The Central Bank cannot anchor expectations because there is no overall plan, and this generates inflation”.
Massa launches plans and the Central Bank tries to accompany them, as they can and until the dollars arrive. Without making much noise.
Source: Clarin
