The Deputy Governor of the BCRA, Vladimir Werning, presented “Monetary Policy in the Face of Current Challenges” during the CXVIII Meeting of Central Bank Governors at San Salvador on May 28 and 29.
AGENDA
I. Current Challenges: External and Domestic
External challenges: international interest rate rises (impact on country risk and market access)
Domestic challenges: transition to stage 3 of the economic program (introducing foreign exchange freedom)
II. Domestic Challenges: The Transition of the Exchange Rate Regime (Stage 3) Moves Forward without Economic Disruptions
The impact on financial variables, inflation, and inflationary expectations has been limited and temporary
The fundamentals of a non-disruptive exchange rate transition in a bi-monetary economy
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- Orthodox macroeconomic policies: fiscal anchor + monetary anchor
- IMF agreement: financial resources to strengthen the BCRA’s balance sheet without increasing the consolidated public debt
III. Domestic Contrasts: The Current Program (2024-2025) vs. the Previous Stabilization Attempt (2016-2017)
Greater drop in inflation rate, inflationary expectations and poverty in 2024-2025
Removal of the BCRA’s remunerated liabilities and stronger recovery of credit (crowding in) in 2024-2025
Stronger, earlier economic recovery with more external balance in 2024-2025
Higher surplus of dollars from the private sector as a result of the general balance in 2024-2025
Very low asset holdings in domestic currency by non-residents (carry trade) in 2024-2025
