The former Minister of Economy during the Menemist government, Domingo Cavallo, stated that “the rate of February monthly inflation was closer to 10% than 15% highlighted by many consultancy firms.” With which, “The falling inflation rate provides an opportunity to increase the pace of the crawl (gradual adjustment of the exchange rate) and thus eliminate the risk of a surge in devaluation in the coming months,” he warned.
From his blog, the former 1990s official noted that “in addition to the fact that the price of food and other goods sold in supermarkets had increased excessively in January, goods that were normally adjusted to the price of the parallel dollar, electronic ones , for example, have had to cope with the falling price of pseudo-free dollars,” he wrote.
In his view, “the delay in adjusting regulated electricity and gas prices helped February’s inflation rate was lower than analysts expected which feed the forecast market survey published by the Central Bank”.
“Despite this slowdown, The real exchange rate is already at levels close to the average for the 2018-2023 period. This means that the real exchange rate related to exports, which is lower than that of imports due to the national tax, is close to dangerously to levels from which it should have been devalued in the past.”
And then he states it “the drop in the inflation rate offers the opportunity to increase the pace of the crawl and thus eliminate the risk of a jump in devaluation in the coming months”.
According to the former minister, “the average inflation rate for the month, which should be predicted from the data that the INDEC will publish, fell to 10.1% and that of the last 30 days to 8.4%. These estimates date back to February. 15 at 12.4% and 9.2% respectively, which indicates that the deceleration was strong in the last two weeks of February.”
For Cavallo, “it is very clear that the reduction of the gap between the official exchange rate and the parallel exchange rate has helped the realignment of relative prices in a direction similar to what should be expected from a normalization of foreign trade “.
Source: Clarin
