The Central Bank defrosted the issuance of pesos

September 19, 2019 – 01:27
It will modify the goals of the monetary base to contemplate a monthly growth of 2.5% in September and October. It also raised the floor of the Leliq to 78%.

After defending layer and sword the "zero" growth of the monetary base, that is, the amount of money injected into the economy, the Central Bank gave him the death certificate.

The Monetary Policy Committee (Copom) of the BCRA decided to adapt the parameters of its monetary scheme: increase the goals to a growth of the monetary base of 2.5% monthly in September and October.

In the case of September, the variation is considered with respect to the bimonthly goal of July-

August, leaving the monetary base goal for the current month at 1,377 billion pesos. These goals will be adjusted according to the net exchange operations carried out by the BCRA from the date of publication of this statement.

"The acceleration of inflation produced by the depreciation of the peso implies a reduction in the real supply of money, while the new exchange rate regime allows to project a real demand for sustained money. In order to avoid an excessive monetary contraction, in a context that it already had an adjusted liquidity, it is necessary to update the monetary base goals originally established ", the entity apologizes in a statement released yesterday.

According to the Central, the monetary base goals announced are set in a context in which money demand projections may lose precision.

Consequently, he says, and to guarantee the contractual nature of the monetary policy, Copom will increase the lower limit for the interest rate of the Liquidity Letters (Leliq) from the current 58% to 78% in September, during the inflationary peak.

For October, this limit is set at 68%, consistent with market projections regarding a slowdown in the inflation rate.

"Copom believes that these measures will allow us to maintain a positive real interest rate and resume the deflation process starting in October," he argues.

The resolutions were adopted with the unanimous approval of the people who make up the Copom. It is made up of the president, Guido Sandleris; the vice president, Gustavo Cañonero; the second vice president, Verónica Rappoport; Enrique Szewach, director appointed by the board of the Central, and Mauro Alessandro, deputy general manager of economic research. "We hope that meetings with the Argentine authorities in the coming weeks will be an opportunity for dialogue (on these and other issues). The IMF staff remains committed to Argentina and continues to work with the authorities to address the difficult situation facing Argentina." , said a spokesman for the agency.