The Government has chosen: high rates to reach October with a quiet dollar – 01/05/2012


"The rate in the levels drones the economy." The phrase, frank and honest, came from the mouth of a key minister Mauricio Macri. It was this Friday, the average Leliq average closing at 59.28%. "Production is not viable".

On the other hand, the same official – and other ministers even – admit that High rates stabilize the economy. They won't say it loud. There is a phrase. It is merely a rework for the economic team of the economic team and will never boast like that in public: "Today, the Macroeconomy is better than a year ago: we have reduced the financial deficit, we corrected the relative prices and the current account imbalance. Is Missing? Let down the sandals rate"But what is possible, according to economists, is still lacking. Also in government.

The Central Bank knows about the returns and times of the Executive Power. Sandwiches had many with them. There is Washpa. They are the same (or almost) officials who boasted that the Central Bank (with Federico Sturzenegger) had very high rates a year and that appreciated the exchange rate, hiding the growth of the economy. He made a statement explaining when he was in the treasury.

"My vision is that the interest rate had to go down two points per month over the next three months", Says the former general manager of the central bank Julio Piekarz. For the economist, Argentina's current economic model needs low rates not only because of the recovery of activity ("they do not impact so much on production"), but because of financing SMEs, consumption and "the real terms increase in State's debt, including that of the central bank ". The challenge, for Pijzars, is the same, as noted on Friday by the key minister of the Makri Government ("lowering interest rates") while raising Exchange rate ("I do not like the dollar on the floor of the non-intervention zone, it is falling behind; It should be between $ 40 and $ 40.5). All this, without the inflationary worsening expectations.

But pijzars recognize that it's not easy. So, say that "Still missing for the rate to go down". Federico Furiase, Economist or EcoGo, says that for the rate reduction to fall "it is necessary that the devaluation-inflation expectations and the country risk go down a new step". The above rising rates will put pressure on inflation at the beginning of the year. "I also do not see the rate coming down soon, step by step," furious.

And in the meantime? What can the central bank do? Isn't the rate determined by supply and demand? "On a daily basis, he did much to give an indication to the market that he would lower it and see how it reacted," answers Pijzars.

The government left these forecasts apart. At least publicly. Inwardly, they admit, they face a year that "will be very hard". So they say near President Mauricio Macri. The data of this week that a fall of the industry from the month of November of 13.3% annual "will also appear for the month of December," admit. "The slowdown in troubles will be seen in the figures of the first quarter." Higher inflation expectations 2019 (28.7%) increased according to the latest survey outlook and as a result, most of the adjustments in transportation, electricity and gas will be in the first half.

Giving evil forecasts can feed back pessimism. And the worse they are, the more Makri will be asked about his management of the economy. His picture would fall in that case, even worse, would give surveys more time, and would suffer investment and consumption. These pessimistic forecasts would be confirmed. The economic team fails to show up as an over-optimist in the face of the future. Especially in the context of recession and high inflation. Not even when, in recent days, international markets have given respite to developing countries' stock exchanges and Argentina. Country risk dropped one hundred points in a week due to the better outlook for the US. There. Economy. Conclusion? Provide the least amount of forecasts and arrive with A stable dollar in October. Prudence will prevail with the course. In the government give: today drones the economy. "However, the government has already chosen," says Pijzars, "between high rates and exchange rate instability, they chose the first for this year."

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