The Limited Times

Now you can see non-English news...

Analysts say Massa's measures have little impact on reversing expectations and lowering inflation

2023-05-14T15:06:57.204Z

Highlights: "At first glance it has zero impact," said Fernando Marrull. "They have no power to change expectations," said Martin Polo. What is the extent of the rate hike and the increase in the pace of devaluation?. Cornered by the lack of dollars and inflation that, three months before the PASO, is revealed as unstoppable, Minister Sergio Massa rushed a package of measures this weekend and an announcement for the press on Sunday morning. What are the three key measures with which Massa seeks to lower inflation?


"At first glance it has zero impact," said Fernando Marrull. "They have no power to change expectations," said Martin Polo. What is the extent of the rate hike and the increase in the pace of devaluation?


Cornered by the lack of dollars and inflation that, three months before the PASO, is revealed as unstoppable, Minister Sergio Massa rushed a package of measures this weekend and an announcement for the press on Sunday morning. From the list of actions released by the Ministry of Economy, in the City they were skeptical about the effects that two key aspects may have for the market: the rise in rates and the "management" of the daily rhythm of devaluation.

Specifically, the Central Bank would raise the reference rate of the economy again to take it from the current 91%, to 97%, about 600 basis points, in a movement "a little faster" than it made last month, when it raised by 1000 basis points the yield in the banks, a week after the announcement of inflation in March and in response to a shot of the parallel dollar, who even flirted with the $500.

In addition, in the midst of a persistent fall in reserves, both gross and net, and with a monetary authority that cannot reverse the red of dollars this month for its sales at the beginning of May, the Government announced that the Central Bank "will increase intervention in the exchange market and will manage the pace of crawling peg" (daily devaluation).

Neither measure has yet been formalized. The Central Bank did not detail whether the board has already met to be able to move forward in the direction that Massa communicated earlier, but in the market they expect that both these measures, more financial if you want, and the others announced, have a neutral effect on the current progress of the economy and prices.

"

At first glance, this has zero impact," said Fernando Marull, of FM y Asociados, when consulted early Sunday by Clarín. "Raise rates, "central market units." It sounds like more fiscal spending everything," he said.

If the rate hike that the government let go of materializes, the fixed terms would yield 154.5% per year of effective rates and just above 8% per month. That is, with this increase, bank loans would not beat the inflation that was registered in April.

Cohen's economist, Martin Polo, said: "Raising the rate a little bit after inflation rising so strongly is not much. The urgency is for people to stay in the peso, not to fall the demand for pesos and to accelerate inflation even more. So on that side I would say that it is good that the rate increase, despite obviously the impact that you are going to have later on the level of activity and also on the monetary issue itself. "

Polo warned that: "All the measures that were announced is what they have been doing. What happens is that they have no power to change expectations and no firepower with reserves so low. They also have no power to change expectations with such a messy government," he said.

Along the same lines, Gabriel Caamaño Gomez, of Consultora Ledesma, said: "Clearly these measures are totally insufficient. If you want to curb inflation, what you need is a stabilization plan. We already know that. We know that the government has neither the pretense, nor the credibility, nor the time horizon to do so."

The economist warned that the official exchange rate is already behind the rise in prices and that the measures announced not only do not correct expectations, but in the long run worsen them: "In reality they are saying that they are going to intervene more in the official one, more in parallel and they have no reserves and in this way they will not get reserves. Today the only thing Massa can do to gain time is to get dollars, which is to borrow obviously, to put the next administration into debt."

See also

They will create a super organism to detect "abusive" price increases

What are the three key measures with which Massa seeks to lower inflation?

Source: clarin

All business articles on 2023-05-14

You may like

Business 2024-02-24T05:02:38.895Z
News/Politics 2024-02-15T10:32:21.697Z

Trends 24h

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.