Inflation at 8.4% in April continues to have consequences and the announcement of the measures published on Sunday by the Ministry of the Economy fails to set foot or change the climate of the market uncertainty.
The rise of $14 in the blue dollar on the first two wheels of the week maintained the widening of the exchange rate gap which became the result to watch in the coming days.
An unwritten rule of government action is that it reacts when distance between wholesale dollar and free or financial dollars exceed 100%. With a gap of 80% official spirits calm down, with 100% or more prices weaken and even more.
The gap between the wholesaler’s $231 and the cleared dollar is around 104% and with blue (at $488) touch 111% and turns on the red lights on the official scoreboard in the midst of an inflationary rocket that hits no ceiling.
The survey of the first week of May by EcoGo (Marina Dal Poggetto) plans for this month a 8.8% increase in retail prices with the same percentage increase for the food and beverage basket.
The Capital Foundation (Carlos Pérez) argues that May already has a high floor of around 8% “taking into account all the impact of the leap in financial dollars, while recording important adjustments in regulated prices, which will add 1.5 points to the cost of living index“.
And emphasizes that the electricity and gas rates they increased respectively by 3.2% and 25% on average for residential users. Added to this is the 7.8% increase in public transport in the AMBA.
On this basis, and according to Sunday’s Economy announcements, the Central Bank faces a new exchange rate dilemma: whether to speed up the rate of increase of the official dollar in order not to lag behind inflation and limit currency loss foreigner to pay for imports, would fuel the rise in food prices.
But, if it lags the official dollar without having foreign currency in reserves, the bets would increase for a devaluation weighing a certain amount.
In the government they recognize it they have lost the battle to make the official dollar credible at $231 when the liquidated cash is around $480 and the blue cash is $490 and without having the time or the political weight to attempt a plan that tends to close the fiscal deficit somewhat or reduce a large wave of issuance of pesos that wet the market .
So what’s left Sergio Massasay around them, is to double intervention on the foreign exchange market by selling dollarised bonds (and also cash dollars. Last week they were around 130 million dollars) to see if it eases the pressure on cash with the liquidation but, by now, not notice.
The minister announced that he is waiting for the International Monetary Fund to authorize the disbursement of the equivalent to 12,000 million US dollars and that this will be a balm for the dollar. It must always be considered that officials hope when faced with difficult situations.
They say in Economics that, on this occasion, the IMF is not asking for a devaluation, but if, as it has already begun, an increase in the interest rate in pesos in order not to lose against inflation.
And, in addition, some fiscal signals which, they interpret in the Government, would come about with the increase in electricity, gas and transport tariffs and the consequent reduction of subsidies. In pre-election times there is always room for imagination.
The key to the advancement of IMF dollars will be knowing whether the government will be allowed to use them to intervene in the market to mitigate the rise in free dollars.
In recent days this intervention has grown and the gap has left the door open for another “pasta” of those who buy Mep dollars and sell in the blue.
That gap was 10.1% on Tuesday, a difference of no less than $45 to the dollar. Some activities allowed by the exchange rate are difficult to overcome.
The Government has already verified that, in this context, delaying the official dollar does not prevent a jump in inflation if there is a jump in free dollars.
And now the interest rate bet is still a bit more of the same: raises the reference rate by six points to 97% per annum (8.08% per month) to subtract incentives to cover savers who buy dollars but, at the same time, it is linked to having to issue one trillion pesos a month pay interest on liquidity bonds (Leliq).
Thus, the Central Bank tries to deposit the excess pesos in banks and sells Leliq to the banks for which it undertakes to issue to pay interest and thus increases the amount of pesos that can be dumped on the market in the future.
Many pesos in circulation and the Central Bank’s net reserves in the negative range rekindle the need for Sergio Massa, whether or not he becomes the candidate of the Frente de Todos, to obtain foreign currency to reassure to some extent the transit until the next government.
Source: Clarin
