Lucas APC

Two years ago, the Argentine government inherited a broken central bank, it had accumulated a stock of interest-bearing liabilities equivalent to roughly three times the monetary base, paying rates close to 254% annually. This was not sustainable: it implied an explosive dynamic where the central bank was effectively issuing money to pay interest on its own debt. Since then, the adjustment has been significant. The Central Bank has been gradually absorbing and restructuring that excess liability stock, reducing its quasi-fiscal burden and improving the consistency of the monetary framework. A large part of the problem has been “digested” through a combination of fiscal adjustment, lower interest rates, and balance sheet normalization. Most importantly, over the last eight months, the monetary base has remained broadly stable. But money demand declined, largely due to pre-electoral uncertainty. As confidence weakened, people reduced their demand for pesos, putting pressure on prices. Now, early signals suggest that money demand is beginning to recover. If this trend consolidates—and provided the current policy mix remains consistent—this should lead to a further decline in inflation in the coming months, particularly in the second half of the year. In short: The initial problem was a massive monetary overhang and a quasi-fiscal time bomb. The policy response has been to stabilize the nominal anchor and clean up the central bank balance sheet. The next phase depends on restoring confidence and rebuilding money demand, which is already starting to happen. If sustained, this dynamic points toward continued disinflation ahead. Inflation was 211% in 2023 and 32% in the last 12 months. And you will see further decline in the next 12 months I am in favor of dollarization, but you should look at the whole picture...

Díganle hola al nuevo súper ciclo de commodities. Argentina no debe perder este tren.

Loco, estos palermitaños nunca maduraron. La de planificar gastos y economizar nunca la aprendieron? Imaginate, tira plata como una regadera y todos los meses le pide guita a los padres... Mamita!