From two different shores, the president of the Central Bank, Luis Caputo, and the Minister of Production, Dante Sica, must deal with the same problem: high interest rates. After a week in which the exchange rate remained calm, the analysts’ eyes now rest on the reference rate set by the Central Bank at 60% and which it promised to hold at that level until December. Caputo’s strategy of removing uncertainty from the dollar paid off in recent days, but it is still early to take the battle for granted. For this reason, the Central Bank continues to show commitment to rates as a mechanism to retain pesos and at the same time tries to find a way for inflation to begin to fall. From the shore of Sica, the central concern is how to avoid that the productive activity ends up suffocated under the weight of the devaluation, the fired of prices and the expensive rates that do not exist the access to the credit.

Last week Caputo brought water to his mill: he took an important step in reducing the stock of Lebac, which now stood at one third of the $ 980,000 million that was when Toto took over the Central.And he did at a rate of 45 % annual, which opened the chances that the rates began to fall. However, this effect is far from reaching the credits offered by banks. At the same time, he managed to get the dollar down to $ 38.70 at the retail level. The Minister of Finance, Nicolás Dujovne, also scored a bean: with the placement of $ 150,000 million of Lecap - at rates of 48.9% to 50.5%, according to the terms - he managed to get orders for US $ 930 million in funds foreigners, in a sample of which the rejection of the investors by Argentina could be beginning to be reverted. And with this, the banks began to think about accommodating the yields to tempt the savers to stay in pesos.

For Sica, the week was more complex. On Thursday it was known that the unemployment rate rose to 9.6% with an economy that fell 4.2% in the second quarter. And the worst is yet to come. Minister R acknowledged that in recent months the industry “is suspending personnel.” However, he maintains the hope that “if this exchange rate calm is maintained, the market will have a low interest, something positive for the industry.”

Faced with this dual effect of the rates that on the one hand contribute to calm the dollar and inflation, but on the other reheat the recession, analysts recommend moving with caution. For Federico Furiase, of EcoGo, there will be no changes in the short term. “The high rate is one of the antidotes to try to contain the exchange pressure and to limit the transfer to devaluation prices,” he says.

The cost of maintaining the reference rate at 60% until December “is to extend the recession. In the middle the chain of payments cools and there is a certain increase in irregularities from very low levels, “he says. “The monetary absorption and the recession are the counterpart of the low transfer to prices that the devaluation is having, which is still very high because inflation travels far above wages”.

In this context, Furiase highlights that “the Central has to find spaces to lower the rate without causing turbulence. That is why it is key to generate credibility, coordinate capital inflows with the expectation that the IMF will expand the stand by and will give more degrees of freedom to the Central. “

However, he warns that “lowering the rate implies risking credibility, because the Central already committed itself in two releases not to lower it.” That is why he emphasizes that “I do not see that I will have much room for this year. By 2019 I am quite optimistic, because we will no longer have the Lebac ball and there will be a high exchange rate. If the planets are aligned, there will be a lot of room to lower the rate. ” The warning signal that Furiase sees is that “the recession is going to consume political capital to the Government for the electoral year” and that at the same time, “it will make it more difficult to lower the rate and leave the parade”.

By 2019, the Government is betting on a stable dollar and 23% inflation. Furiase remarks that for this to happen “it is necessary to recreate the inflow of capital, which is what will increase the supply of dollars without the Central being the only one that intervenes.” If the dollar remains at $ 40 and inflation is at 23%, “it would generate a delay that would bring the real exchange rate to the level it had two months ago. If the income of capital is coordinated, there is room to delay the dollar. ”