Next Thursday the curtain will rise to officially confirm how close December inflation was to 30%, hitting its highest level in a long time.
On that day, INDEC will release data on the rise in the cost of living in the last month of 2023, which in turn will contemplate the onset of the effects of the 55% peso devaluation established at the beginning of the presidential government. Javier Milei.
According to EcoGo forecasts, what if inflation was 29.1% In December there would be a statistical drag of 12 points for January when the increase in the index would be around 23%.
The numbers are scary, just like the 27% increase in petrol or 39% in prepaid medicine in a career where retirements and salaries are delayed and electricity and gas rates are on the verge of rising.
The jump in inflation compares with a dollar fixed at 800 dollars which has had a positive result in terms of purchasing reserves for the Central Bank (it has accumulated 3.3 billion dollars) but which could see its attractiveness for the liquidation of exports faced with the possibility of losing real value in the next three months.
The minister Luis Caputo pegged the dollar at $800 and announced that it would rise 2% per month in a clear attempt to do so put an end to price increases of exportable products.
And a fixed exchange rate constitutes one of the fundamental pillars in the attempt to stabilize prices and, even more so, when one of the important issues of exchange rate policy is How quickly the December devaluation is passed on to prices.
The price liberalization that began with the new government has now translated into very significant increases for companies they began to review in the face of a foreseeable decline in sales.
A traditional consequence of inflation in Argentina is that businessmen take advantage of uncontrolled periods to raise prices following the unwritten rule that, at first, it’s less expensive to lose customers of the ability to set high prices to rebuild sales margins.
The price recomposition process is strong and accelerated The decline in sales that is starting to be felt could worsen as the summer progresses.
With further information on which the latest report from Quantum, Daniel Marx’s consultancy firm, focuses, according to which: “In the coming weeks the money market will have to face the impact of lower seasonal demand for moneyto which is added the effect of highly negative real interest rates.”
And faced with this possibility, investment funds would migrate to more alternatives. “defensive” such as CER-linked or dollar-linked bonds despite having “strong negative yields.”
It is in this context and even beyond the political and judicial difficulties that the government encounters in carrying forward the DNU project and the Omnibus Law, the eyes of the financial world once again focus on the issue exchange gap.
The gap between the wholesale dollar of $812 and the cash settlement of $1,051 exceeds 29%, after falling to 15% a week ago.
For several analysts, a gap level of around 30% best reflects the level of political uncertaintyeven when they discount the results obtained by the government relaunch the agreement with the IMF this would open the door for more dollars to arrive.
Those currencies would the validity of the 800 dollar dollar is more credible which facilitated the liquidation of exports (also encouraged by the announced increase in withholdings blocked by Congress) and the recomposition of the Central Bank’s reserves but, taking into account that Payments for delayed imports continue to slow.
Suffice it to say that, although the Central Bank was able to add $3.3 billion to reserves, “net” reserves remain negative at around $8 billion.
As was predictable after years of restrictions and controls, overcoming the steep exchange rate gradient would not be easy and even less so when, at the same time, an attempt was made to rebalance relative prices with the consequent jump in inflation.
Source: Clarin
