1) @BancoCentral_AR’s decision yesterday to maintain the interest rate at 60% was expected, and reasonable, as #Argentina’s central bankers have pledged not to lower the rate until at least December.
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2) Thanks to the sharp peso devaluation (so-called pass-through), this month’s inflation figures in #Argentina are expected to be ugly.
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3) That said, given the political calendar, it is important to consider the implications of
#Argentina’s suffocatingly high interest rate (pro-cyclical, or contractionary, doesn’t quite capture the magnitude of the monetary policy drag).Show this thread -
4) With additional headwinds from fiscal policy (targeting a 0% primary fiscal deficit next year),
@jpmorgan now expects#Argentina’s economy to shrink by 2.2% this year, the 2nd recession of@mauriciomacri’s presidency.Show this thread -
5) Should admirers of
#Argentina’s pro-market turn worry? Well, the election is >1 year away. But candidate selection and the primaries are months earlier, leaving little time for an economic recovery.Show this thread -
6) So, will
#Argentina’s economy recover quickly? It’s possible, but far from assured.@Citi, for one, predicts declining investment, due not only to higher interest rates, but also increased country risk and fears that Peronism might return next year.Show this thread
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