in argentina, the monetary policy transmission channels are only just being rebuilt, since credit to the private sector accounts for 10 percent of the economy, still far below the latin american average. therefore, patiently rebuilding the power of monetary policy tools is a great step towards consolidating growth and stability. meanwhile, monetary and financial policy should be conceived under a general equilibrium approach, where fiscal solvency, the monetary balance and external sustainability are mutually determined. against this backdrop, a sustainable and long - lasting reduction of the inflation rate depends on the comprehensive, joint and coordinated action of the monetary policy, the fiscal policy, the wages policy, and the competition policy. thus, we see that the current regime of control over the money supply and the demand for money combines the necessary doses of monetary prudence ( as shown by sixteen running quarters of compliance with self - imposed monetary aggregate growth targets ) and flexibility ( which has enabled us to weather the recent turbulence ). through this scheme, by trading in the repo market, issuing central bank notes and bill, and collecting in advance the rediscounts granted during the crisis, we eliminated any potential excess money supply. in fact, in the first half of the year we sterilized 80 percent of foreign exchange purchases – up to almost ars 25 billion. and this did not affect the bank ’ s positive balance sheet. the monetary program sets indicative targets for all monetary aggregates. however, the achievement of these targets is linked to the change in the means of payment, since in an economy where financial normalization has not yet been achieved, it would be healthy for savings – time deposits – to be more rapidly channeled back into the financial system. deposit performance has not been affected by financial uncertainty and time deposits keep growing above the average. this is another eloquent example of the strategy developed in the past few years to face contingencies : the recovery of banking liquidity and solvency, which allows us to have a sound financial system today that acts as a “ turbulence buffer. ” in turn, improved profitability, together with capitalizations, strengthen the solvency of the system. just as reserves play the role of liquidity insurance to the monetary authority, banks ’ cash is the first defense line against unexpected events. for this reason, banking regulations fostered the recovery of liquidity, equivalent to almost 40 percent of total deposits, one of soundest of the region. we should not forget about the growing dynamism of banks in getting

situations. indeed, we have begun to buy back short -, medium - and long - term securities to inject liquidity to the market, proving that they are in fact monetary policy instruments. besides, regulatory measures were adopted – bimonthly calculation of banks ’ liquidity requirements – to “ decompress ” stress situations in the money market. clearly, for the current transition stage of the argentine economy, there is no other viable and sustainable alternative than the current managed floating regime. a system based on free floating, still called for by many, would have involved the risk of going back to the devaluation - inflation spiral that has been so recurrent throughout our economic history. in the past few days, however, we also learnt that in spite of the necessary foreign exchange stability for the current transition stage, there is no “ foreign exchange insurance. ” we have seen that on wednesday 25, when the upward trend was most marked, the exchange rate increased, leading to a volatility that ruled out hopes of guaranteed profits. when devaluation expectations became noticeable, threatening to manifest itself in the rest of the economy, we made it clear that we will mitigate steep increases potentially having an inflationary impact or causing uncertainty. once the foreign exchange rate was stabilized, we adopted measures to reduce the upward pressure on interest rates, a process that will continue until normalization is achieved. but, what do we mean when we talk about a stage of transition? in post - crisis periods, the macroeconomic fundamentals usually overreact to then gradually readjust themselves and converge towards a long - lasting scenario. these transition stages take time and raise enormous challenges. our neighboring countries ’ experience teaches us that flexibility and gradualism in both policy design and implementation are the adequate way of riding them. during the money and banking conference organized by the central bank of argentina, vittorio corbo, president of the central bank of chile, stressed the sequential process undergone by the chilean economy following the crisis of the early 1980s. four elements have been of utmost importance in this long process : consolidating fiscal solvency as a countercyclical tool, reestablishing external sustainability, restructuring liabilities, and rebuilding the financial system. once all these aspects were addressed, progress was made in the consolidation of a regime that is nowadays highly credible. thus, in 15 years, chile managed to lead inflation from around 30 percent to the current annual 2. 9 percent, after patiently building credibility and institutions.