martin redrado : central bank of argentina ’ s key mission for the next six years speech by mr martin redrado, governor of the central bank of argentina, before the senate, buenos aires, 5 october 2004. * * * thank you very much, mr. vicepresident, mr. chairman of the agreements committee. on the occasion of my first public speech i will present the guidelines of the office mr. president has entrusted to me for the next six years. as chairman of the central bank ’ s board, i wish to deliver on a very clear and precise mission, which is intended in the first place for the more than 2, 300 employees i am in charge of leading in the coming years, but also for the general public and the senate so that it may assess our management ’ s goals and how we attain them over this 6 - year term. i would like to underline that the central bank ’ s key mission for the next six years is to make the peso become a store of value for the argentine people as a whole. in recent times, we have succeeded in recovering the peso, our country ’ s currency, as a transaction reserve. the argentine people have resumed transactions in pesos. however, our mission ’ s main objective is to restore the peso ’ s power in terms of saving, because only by consolidating argentine savings in pesos can we encourage a vigorous investment process that should permit the fulfillment of the financial system ’ s major role in transforming argentine savings into investment, into a productive investment that creates more employment, more well - being and more possibilities for the population as a whole. in a word, the major role of accomplishing these targets and of making the peso become a store of value implies that every monetary policymaker decides what instruments will be used. on some occasions throughout our history, our exchange rate has been pegged as an anchor for our monetary policy. other countries instead have pegged their interest rate. i would like to be very clear on this point - the central bank of argentina has established that an inflation targeting approach is the bank ’ s best contribution to allowing our people to save in pesos and to appreciating our people ’ s real wages. this is our bank ’ s major role. it may be seen as an indirect and subtle role in furthering wellbeing and real wage growth, but protecting our currency ’ s value indeed leads to encouraging saving in pesos and therefore long

. it is natural to witness an upward trend in the interest rate. the facts show that private sector deposits have remained unchanged in the past month. the structural conditions we have built leave no room for speculation and reflect on the banks ’ solvency and liquidity after three years of positive systemic profitability, also involving an unprecedented central bank balance sheet. this allowed us to adopt a decisive preventive action in the peso market. the use of instruments devised to that end injected liquidity through a lower primary issue of our notes, the early repurchase of those bills in the secondary market and the full availability of repos ( one -, seven - and sixty - day credit lines to commercial banks in need of liquidity ), both at fixed and variable rates. our scheme is based on what is known as risk management approach applied to the monetary policy in economic theory. it entails not focusing any longer on the short term, combining technical tools with the policymaker's judgment, evaluating risks associated to each circumstance without being limited by dogmatic prejudice or betting on excluding scenarios. all in all, the objective probability of a crisis similar to those of the past is virtually zero in argentina now. this reality is not fortuitous but the result of implementing a robust and consistent agenda. the central bank has enough tools – patiently designed in recent years – to use in situations like this week ’ s. the big difference is that, this time, argentineans may trust that these tools will protect their savings and jobs.