The Deputy Governor of the BCRA, Vladimir Werning, presented “Argentina’s Economic Program (Stage 3): Domestic Stability (Lower Money Stocks & Balanced Fiscal Flows) Provides a Solid Foundation to Build External Flexibility (Higher FX Stocks & Balanced BOP Flows)” at the 11th BBVA Latin American Conference held in London on January 20, 2025.
AGENDA
I. Collapsing Inflation Expectations: Where are they Heading? (South) and Why? (Rapid Policy Delivery)
1 | Putting an End to a High Inflation Regime: Fiscal, Monetary & FX Policy Shift Averts Hyperinflation
2 | Perception Among the General Public: Inflation is Low and Expected to Decrease Further
3 | Revisions to Analysts’ Forecasts: Disinflation advances steadily, avoiding Road-blocks and Pot-holes
4 | Pricing in Financial Markets: Break-Even Inflation is Discounted to Fall Amid Limited Inertia
II. Strong Policy Anchors: Which are Working? (Nominal & Real) and How? (Broad Policy Consistency)
1 | Fiscal policy: Restrained Demand, Eliminated Peso Financing & Sterilizes BOP Flows
2 | Monetary Policy: Shrunk Peso Stocks & Flows, Cleared Peso Contingencies & Lifted Real Rates
3 | FX policy: Realigned Relative Prices (Jump) & Reduced Inertia/Indexation (Crawl)
4 | Income Policy: Reduced Inefficient Subsidies (Regulated Prices) & Increased Direct Transfers (Social Programs)
III. Widespread Impact: In What Dimensions? (Real Variables & Animal Spirits) and When? (Policy Lags & Credibility)
1 | Non-neutrality of Money: Already the Economy is Lifting Off & Poverty is Reversing Gears
2 | Keeping Close Score: BCRA Reserves are On Target (Adjusting for One Less IMF Disbursement & One Early Bond Payment)
3 | Residents with Skin-in-the-Game: Public Support (in Election Year) & Capital Repatriation (Improving BOP)
IV. Next Steps: Which Priorities? (Exiting Controls & Currency Competition) and Why? (Greater Policy Flexibility)
1 | Capital Account Inflows (corporate issuance, household repatriation) will be Supportive of the Current Account
2 | Relative Price Level: Abnormal Margins, Taxes & Regulations Contrast with Normal Wage Levels
3 | Exiting FX Controls: Conditions (Inflation Inertia & BCRA Reserves) and Relative Price Flexibility (Speed of FX Passthrough)
