IMF applauds Central Bank's decision to tighten monetary policy

The International Monetary Fund threw its weight behind the Central Bank's monetary policy on Tuesday, celebrating the move to freeze the currency band through the end of the year.

This provision sets a controlled margin for the exchange rate to the dollar, with sale prices between 39.75 and 51.45 pesos per greenback.

"We welcome the changes to these parameters announced today," IMF spokesperson Gerry Rice said in a statement.

Before the announcement, the limits of the currency band were set to alter gradually every month, according to the terms of its US$57-billion agreement with the IMF.

The Central Bank’s latest decision is designed to combat the inflation that has risen 54.7 percent in the last twelve months, closing March at 4.7 percent.

“The [inflation] level is far too high. One of the changes that we decided to introduce is to maintain the limits of the exchange rate at their present level through the end of the year," the president of the monetary authority, Guido Sandleris, said at a press conference.

Rice acknowledged that "breaking the inflationary inertia remains a challenge for the Argentine authorities,” but he remained optimistic.

"The current monetary policy is designed in an appropriate way to meet this challenge," he said.

As a second measure, the Central Bank "will refrain from buying currencies below the lower limit in the exchange market until June 30," Sandleris said.

The announcement comes six months before the presidential elections, in which inflation, falling purchasing-power and the economic downturn have cast shadows over Macri's re-election hopes. The government has acknowledged that the devaluation of the peso is the main inflationary factor.

After a GDP contraction of 2.5 percent in 2018, the recession is proving persistent. Unemployment is over 9 percent, and poverty is also on the rise, now affecting 32 percent of the population of large urban centers.

The exchange rate closed on Tuesday at 43.38 pesos per US dollar and the depreciation of the currency so far this year is around 9 percent.

-TIMES/AFP