Argentina Looks to Lift Final Currency Controls in Coming Months

  • Bank aims to get `as close as possible' to 25% inflation
  • Bank will lower interest rates when inflation is decelerating

Argentina will aim to lift the remaining restrictions on currency trading in coming months and will only intervene in the market when moves are “unjustified,” central bank President Federico Sturzenegger said.

Sturzenegger, who said the central bank has no estimate for the value of the peso at the end of the year, reiterated his commitment to a floating currency in a press conference Thursday. He said the peso should move in line with the real in Brazil, the country’s biggest trading partner.

President Mauricio Macri took office in December and promptly removed most currency controls, leading to a one-day 27 percent drop in the peso as the central bank ended daily dollar sales that had propped up the exchange rate. Some regulations left over from the previous administration still limit investors from transferring proceeds from local fixed-income and equity assets, curbing the country’s ability to attract foreign investment after years of restrictions that resulted in sluggish growth and economic distortions.

The peso has fallen 8.4 percent this year, the worst performing among 24 emerging-market currencies tracked by Bloomberg and compared with a 0.6 percent decline for the next-worst performer, India’s rupee. Analysts surveyed by Bloomberg estimate on average that the peso will lose another 14 percent by the end of the year.

Argentina will get “as close as possible” to this year’s inflation target of 25 percent, and the central bank will only lower interest rates when there is certainty that the rate is decelerating, Sturzenegger added. Consumer prices will likely rise 34 percent this year, according to the median estimate of analysts surveyed by Bloomberg.

“We are set on lowering inflation significantly in the second half of the year, and that for us is the strongest guarantee not only of growth in demand and employment but also to permit growth in the long-term,” Sturzenegger said.

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