For analysts, the new measures are not enough to contain prices and the dollar

The measures announced Thursday by the government to contain the rise in alternative dollars and lower public spending They are going in the right direction, but they are not enough to change the market sentiment, economic analysts point out. The main reason is that the rate hike is lower than inflation and the subsidy cut is not significant.

The Central Bank turned up on Thursday 300 basis points the performance of the Leliq (from 49% to 52%), the largest of the six increases it has achieved this year. The consulting firm Ecolatina specifies that in actual annual terms “the extent of the rise is even more pronounced: it returns 66.5% (compared to 61.8% before the rise). With a slightly lower year-on-year inflation to 61%the rate is considerably positive in real ex ante terms“.

However, they stress that “monetary policy is mainly forward looking and, despite the substantial increase, the rate does not yet exceed the expected inflation in the short term “.

A key point is that the Leliq yields an effective monthly rate of 4.3%, below the inflation forecast for this month, which will not fall below 5%. The IPC GBA Ecolatina in fact recorded an increase of 5.6% in the first fortnight of June compared to the first fortnight of May. “The monetary policy rate is still below expected inflation: it would be around 70% in 2022 … with upside risks, “explained economist Santiago Manoukian.

The rate hike came in a week in which the Central Bank had to intervene to put a floor on the downside of Argentine bonds that adjust to inflation. FMyA’s estimate is that the issuance of pesos to buy Treasury debt reaches 230 billion dollars since the beginning of the crisis.

According to Fernando Marull, director of FMyA, after this week’s adjustment, “the rate is 4.5% per month, still below June’s forecast inflation rate of 5%. Loss of interest rates against inflation encourages dollarization“.

“The pesos debt crisis these days has forced the government to wake up and has taken steps to calm the markets. Is it enough to stabilize the crisis? No, but it helps “Marul specified.

“We continue to imagine that the Central Bank will have to choose which ‘encepar’, and the debt in pesos is far from normalized. Until PASO 2023, the government cannot be wrong. With little political support and the need to take measures. , the risk is high“.

Faced with this, “the alternative is more and more stocks. There is a high probability that stocks will harden in tourism or services and, as a last resort, imports (inputs) or debt.”

Together with the benchmark rate hike, the government announced tariff segmentation, which will leave 10% of the most resourceful consumers without subsidies. With this measure, subsidies will be reduced, but not as much as had been estimated: just 0.05% of GDP, against the 0.6% envisaged in the agreement with the IMF. Therefore, cutting the government deficit is far from expected.

The analysis of the consultancy Equilibra is that in this context, although the measures announced are not enough, at least it helps to avoid ghosts, such as the fear of investors that the payment of the CER bonds will not be met. «The glass half full is that the Government has the tools to stimulate the refinancing of maturities and avoid raising doubts about the treatment that will be reserved for the debt in pesos “.

At the same time, “the glass is half empty is that most of these instruments involve the monetary issuance or a risk of overheating the exchange rate and the inflationary front “.

“There is only one way to get closer to a definitive solution: move forward with fiscal consolidation. Without spending cuts and without a clear prospect of deficit reduction, the dynamics of the debt in pesos will keep the alarm signals alight “, they slip.

AQ