Argentina c bank on track to target '04 inflation

The president of the central bank of Argentina has said the country should be ready to start inflation targeting in 2004, according to Reuters. Alfonso Prat Gay told a conference it would help Argentina to return to being a normal country.
The president of the central bank of Argentina has said the country should be ready to start inflation targeting in 2004. Alfonso Prat Gay told a conference it would help Argentina to return to being a normal country.

Source: Reuters

Argentine Central Bank President Alfonso Prat Gay said on Monday he was on track to start inflation targeting in Latin America's No. 3 economy in 2004 as the anchor of the bank's monetary policy.

Prat Gay said a year of fiscal surplus and moderate fiscal policy has led to macroeconomic stability after Argentina's worst ever economic crisis and paved the way for a switch from the bank's previous strategy of controlling monetary supply.

"Why do we want an inflation targeting system? Because we are listening to the wishes of Argentines, who want Argentina to return to being a normal country," Prat Gay told a conference on banking and monetary policy in Buenos Aires.

Inflation targeting is the policy of many central banks around the world, including Mexico and Brazil. It uses tools such as adjusting interest rates to influence inflation toward a desired goal.

Inflation hit 41 percent last year as the economy shrank 10.9 percent, but has slowed dramatically this year. The Argentine government last month cut its 2003 inflation forecast to 8.0 percent.

Prat Gay, who worked for investment bank J.P. Morgan analysing world currency movements, said a reasonable inflation goal for Argentina in 2004 was between 10 and 15 percent -- target levels that should gradually fall over time.

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