Tuesday, November 12, 2019
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ECONOMY | 03-09-2019 07:32

Government and IMF in talks over September monetary policy target

Gustavo Sandleris said the Central Bank had failed to meet its monetary base goals for July and August, allowing the total amount of cash in circulation to rise above its target of 1.34 trillion pesos.

The Central Bank is talking to the International Monetary Fund (IMF) about revising its monetary policy target for September, the institution’s president Guido Sandleris told reporters in Buenos Aires on Monday.

Speaking a day after the government reimposed some currency controls in an effort to contain the country’s escalating financial crisis, Sandleris said the Central Bank had failed to meet its monetary base goals for July and August, allowing the total amount of cash in circulation to rise above its target of 1.34 trillion pesos. But, he added, only the quarterly target is binding for the purpose of the IMF program. The September goal is the same as August’s, once the Central Bank’s dollar sales to mop up pesos are subtracted from the monetary base.

The bank chief added that peso deposits are stable and liquidity levels remain high. “Argentina’s financial system is solid,” he said.

The IMF’s record US$56-billion loan with Argentina includes a set of guidelines that the institution assesses periodically. But after the market rout that followed the surprise August outcome, new questions have arisen over whether it will pay out its next scheduled tranche of US$5.3 billion. The IMF described the measures as “capital flow management” in a statement on Sunday, adding that they would remain in close contact with Argentine authorities.

Amid shallow liquidity, the peso strengthened 6.9 percent to 56 per dollar on trading that will settle on Tuesday once US markets reopen following the labour day holiday.

Here are the other main points Sandleris made at the press conference:

  • The Argentine peso strengthened strongly in spot market and in futures
  • The latest measures don’t replace a strict monetary policy, but rather are complementary amid high uncertainty
  • Argentina’s dollar purchasing limits of US$10,000 per month, will affect less than two percent of savers
  • The country needs to build areas of basic political consensus to avoid large bouts of volatility caused by elections
    • The Central Bank expected August inflation to be 1.8% m/m before the market rout

– Bloomberg

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