Fixing Kirchner’s Mistakes – Bringing Inflation to 5%

11.10.2016 • Emerging Markets

From Ivan Carrino – The Monday Newspaper (Argentina) –

In late September, Federico Sturzenegger, president of the Central Bank officially presented the “inflation targeting” of the institution he leads.

The inflation targeting system is one whereby the Central Bank seeks to be a given level of inflation, for which the interest rate used. If inflation is above the target, then the interest rate will rise, causing the contraction in the money market (more people will put money rate of interest, removing it from circulation). If inflation is below the target, then the central bank will lower the rate, generating an injection of money into the market and looking up the pace of price increases.

On September 26, Sturzenegger not turn away from what we had read before and said inflation in 2019 would be 5% and the next year would be reduced to 17%, in the worst case .

It should be noted that clarification. The Central Bank set a goal that actually is a range, and for 2017 that range should be between 12% and 17% according Sturzenegger.

Can it be achieved?

The IMF thinks not. For director for Latin America of this institution, lower inflation to one digit can reach take up to 10 years.

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