He assured that the “correction” of the real exchange rate “guarantees the sustainability of the balance of payments in the international context”. On the rates, he affirmed that there will be “a more pronounced level of monetary hardness”
Federico Sturzenegger, head of the Central Bank
In the midst of the swings with the dollar, the president of the Central Bank, Federico Sturzenegger, defended the rise in the exchange rate and assured that high rates will continue for a long time.
During the 35th congress of the Argentine Institute of Finance Executives (IAEF), Sturzenegger assured that “during the last weeks we showed a correction of the real exchange rate in function of the new international panorama (…). This movement was in response to ensure the sustainability of the balance of payments against this new context, thus preserving the economic growth that takes seven consecutive quarters.
In his presentation, he argued that the exchange rate float “tends to discourage the proliferation of currency mismatches, allowing the banking system to absorb movements in the exchange rate without its balance sheets being stressed.”
He also assured that the exchange rate “is precisely in charge of taking care of the economic activity and accommodating itself in function of the potential external and local swings that the country must face”.
In this scenario, and in the midst of the strong rate hike applied by the Central Bank, he assured that “the interest rate” is the instrument that “acts as a brake on the transfer of these exchange movements to the rest of domestic prices”.
According to him, the current level of monetary policy rate “is located at a level that the institution considers adequate to limit the volatility of the last weeks and contain its possible effects on the disinflation process”.
Defending this measure, he assured that “raising short-term rates is the best way to ensure the recovery of credit in long-term pesos, by anchoring expectations and promoting greater stability in prices.”
Although he acknowledged the “discomfort” that the high rates produce, he maintained that they will continue for a while because “the BCRA sees (…) that it will have to maintain higher levels of monetary hardness to guarantee the consolidation of disinflation”.
“I will not lie to them, telling them that the rates will return quickly to the level they had before, since the institution must determine a more pronounced level of monetary hardness to redirect the disinflation process,” he concluded.