The world’s leading inflation expert believes the current Argentine monetary policy changes are very positive

John Taylor (71), a university professor at Stanford and former economic advisor to US presidents Gerald Ford, Jimmy Carter and George HW Bush, considered that to lower inflation in countries like Argentina, the key is not a number that one wants to arrive at, but a “clear and well communicated intention in terms of the tools to be used.”

He is visiting Argentina for a conference at the University of CEMA. Taylor is an expert on monetary policy and creator of the Taylor Rule – which establishes a relationship between the interest rate, inflation and growth desired in an economy.

The academic highlighted positively the transparency of the monetary policy carried out by Guido Sandleris, the president of the Central Bank, with whom he met moments before his conference. “The simple fact of being able to see the currency bands and the advance of the monetary base on the Central Bank page is very positive,” he said.

In that sense, the economist summarized, “the intention and the policy to reach it are the most important”, and not necessarily a specific number that is sought. “We must distinguish the operation in monetary policy rules of a regime for the transition from a high rate of inflation to a low one,” Taylor said when explaining why an inflation targeting scheme was not “necessarily” the best option to lower the price increases as sought by the Government during the presidency of Federico Sturzenegger in the Central.

(In the United States to lower inflation) there was never an objective of a specific number, they said ‘we just want inflation to be as low as possible’

In comparison, the father of the method used by several countries to determine their interest rates, said: “When the US addressed its own inflation problems, it first attacked the money supply and then moved to a focus on goals and rates. ” That is why, he adds, the Central’s current approach to freeze the monetary base, or the amount of money circulating in the economy plus some monetary aggregates, is correct.

Faced with a question about the recessive effect that is recorded at high interest rates from the Central, the academic stressed that the priority of first order in any economy with high jumps in prices, such as Argentina, “is to lower inflation, hence the rates can go down and the rest of the variables are accommodated. ” In order for rates to fall, he concluded, “the main thing is to look at inflation expectations, the correlation is like this: when expectations fall, rates go down and not the other way around”.