Argentina Macroeconomic Perspectives

Argentina: FX controls allowed the Central Bank (CB) to reduce the Leliq rate in 6.9 percentage points during September

• Measures to limit US dollar purchases, together with higher inflows of funds from exports and reserve sales by the CB, led the exchange rate to achieve a smooth path during September. Although the peso recovered after peaking in August, the exchange rate trended upwards due to the gradual dollarization of small investors and strengthening of the dollar worldwide. Reserves fell USD5.4b last month and to their lowest level since October 2018.
• Furthermore, the refence interest rate dropped to 78.37%, reaching the floor set for last month and partially translating to banks´ passive rates. The CB announced a minimum rate of 68% for October, although proximity to presidential elections will likely keep the rate far from that level.
• Confidence indexes reflected actual political uncertainty. Consumer confidence improved 0.6% mom during September, as some sectors evaluated positively the possibility of a new administration. Confidence was driven by improved macroeconomic perspectives, lower income sectors and inner country areas. Moreover, government confidence dropped 13.2% mom, diluting previous months´ improvements and indicating discomfort with FX regulations and Treasury notes´ maturity extensions.