Argentine policymakers beginning to panic

The decision by Argentina’s central bank to limit the extent to which the nominal exchange rate will be allowed to weaken this year raises the risk that the peso becomes overvalued. Meanwhile, the announcement of price controls expected later today adds to the impression that the government is starting to panic ahead of October’s election and resorting to old habits to tame inflation. The IMF seems on board for now, but its tolerance could soon be tested.