:quality(85)//cloudfront-us-east-1.images.arcpublishing.com/infobae/OJYBHPDJY5F2ZLUSXQX5JBDZ6I.jpg "Despite the new rise in inflation, Sergio Massa still believes that it is possible to get a break in the brakes in April 1")
The strong rebound in inflation in January was already expected weeks ago, but the return to 6% per month still hit hard. This is the second consecutive rise of the index, which represents a strong setback for the strategy of Sergio Massa. But despite this new disappointment, the Minister of the Economy continues to affirm that it is possible to achieve his objective which is to drop to less than 4% by April.
Massa will announce an international loan from banks to strengthen reserves: the rate will be below 10%
These will be currencies that will go directly to the Treasury, so they can be used to continue buying back the debt. The amount would exceed 1,000 million dollars. Government concern over January inflation data, to be released on Tuesday
Achieving such a slowdown in prices is almost a miracle, even in the midst of the fair price strategy, which consists of checking countless products daily. In some cases offering the freeze, and in others with guidelines for a monthly increase of less than 3.2%. The relaunch of the program a few days ago was rushed in reaction to the new price increase, which even accelerated in the last week of January.
In February, it will be difficult to see results. The rise in the price of meat will have its full effect this month, after having touched only marginally in January. And there have also been significant increases in regulated services, such as energy. Therefore, the official bet is that the current and future measures will start to be noticed from March.
Keeping the promise of low inflation has important policy implications. For Massa, this could make the difference between being a presidential candidate or not for the Frente de Todos. And for that, it needs quick results in terms of inflation, which so far have not been achieved. For the moment, its merit is to have prevented a “spiralization” with danger of hyper after the departure of Martin Guzman of the Ministry of Economy. But “disinflation” still seems a long way off.
Falling equity peg will make it harder to get $1 billion from banks
A week of key data for the country begins: local and US inflation will be announced tomorrow and North American retail sales on Wednesday
From the Ministry of Economy, they hastened to explain that this 6% is not a trend, but rather a precise figure that should not be repeated in the coming months. Between the causes of the rebound They mention the adjustment of regulated prices, such as the prices of the bus ticket, gasoline, water, mobile phone, Internet and prepaid medicines. Additionally, they use typical seasonal patterns for January, specifically related to the holiday season. Finally, frosts and droughts caused a sharp rise in fruit and vegetable prices.
“We expect the monthly inflation rate to be close to 3% and that of the year around 60%,” they said. Of the economy, they continue to speak of “inertial components” that hinder a decline, so it is necessary – according to this view – to work on inflationary expectations. In other words, convincing people and businesses that future inflation will be lower than today. An extremely complex task, since it is exactly the opposite that occurs: each year inflation exceeds that recorded the previous year.
At the Ministry of the Economy, an effort has been made to explain that the 6% inflation in January was a one-time jump and not a long-term trend. Therefore, there would be no need for further action, such as raising interest rates by the Central Bank.
Massa assured that more macro and micro measures are coming to keep fighting. The package includes orthodox measures such as following the path of a gradual reduction in the budget deficit, but at the same time heterodox options such as price controls.
Domingo Cavallo: ‘The best Massa can do is stabilize the inflation rate at 6%’
The former minister had already warned that in 2023 the monetary balance would deteriorate due to the drought and because IMF money would no longer be positive. According to him, inflation could fall sharply only in 2025
Additionally, there is an intention to ease access to imports to increase the supply of goods. Of course, the shortage of foreign currency imposes strong limits on this good intention.
Maintaining a certain stability of the exchange rate is also essential so that inflation does not soar further in the months to come. The possibility of a sharp devaluation of the official exchange rate now seems remote (the tightening of the exchange rate would be tightened beforehand if necessary), but the risk of a further increase in the exchange rate differential remains latent. For this reason, there will be announcements of measures related to the strengthening of reserves, despite the drop in dollars that the drought will cause.
Of course, these calculations do not take into account a key factor in this year 2023: the presidential elections they will surely increase the trend towards dollarization and hence the demand for pesos will be reduced. This scenario, most likely from the second quarter, could also trigger another new inflationary spiral, which would destroy this objective of 60% for this year.
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