So how credible did Central Bank of Venezuela chief Nelson Merentes's target to keep the parallel rate below BsF.3.45 per dollar turn out to be? Ermmm...not very.
As you know, I'm not actually allowed to tell you the parallel rate today, but between you and me and 27 million other people, it rhymes with thive dolivars firty cents per bollar. That's nearly three times the 60% gap Merentes says it's the most he'll allow.
In other words, the market had one look at his announcement, had a good chuckle, and went right on doing what it'd been doing.
It's easy to laugh it all off, but this stunning monetary own goal could really undermine Merentes's hold on the economy down the road. Once the market starts to discount the Central Bank's announcements, the bank's ability to actually keep a handle on the macroeconomy starts to evaporate: cuz Merentes can do what he want to the macroeconomic aggregates he control, but if people don't believe he's going to really do what it takes to achieve his goals, the market will just keep eating his announcements for breakfast.
Update: A reader retorts that, to be fair, Merentes only said the bolivar would rally to Bs.3.45 by early December, not right away. That's true, as far as it goes, but irrelevant. If Merentes had any credibility, the bolivar would've rallied today.
To see why, ask yourself this: