The Argentine Peso has rallied the last few days - after crashing to a new record low - in what some consider a vote of confidence in central bank and government promises to crackdown on inflation.

However, don't believe the hype - as Argentine credit markets (far less easy to manipulate than FX) are screaming new lows ahead for the peso...

Prices climbed 4.7 percent in March from the month before, the fastest pace since October and exceeding all eight forecasts in a Bloomberg survey. Annual inflation accelerated to 54.7 percent from 51.3 percent, putting President Mauricio Macri’s re-election bid further at risk.

In response to this surge in inflation, Argentina today said it will freeze prices on 60 food products until October. This follows yesterday's central bank announcement that it would fix the exchange-rate band for the rest of the year instead of allowing it to depreciate. To prop up the peso, the government's already selling $60 million a day of the cash it got from the IMF.

In fact, Capital Economics' Edward Glossop warns that Argentine policymakers are ‘starting to panic’ and ‘resorting to old habits to tame inflation’ ahead of October’s presidential election:

Central bank’s decision to keep the currency band unchanged coupled with an expected announcement of some price controls today “suggest that policymakers are panicking.”

As Bloomberg reports, Glossop additionally says the policy measures also raise the risk that the peso does not fall far enough to offset the erosion of competitiveness resulting from high inflation and wage growth. To remain competitive, the peso’s nominal exchange would need to weaken right to the upper bound and if the peso appreciates to the lower bound, the real exchange rate would appreciate by 30% by the end of the year:

“That in turn would raise the risk of a large adjustment in the peso, perhaps triggered by the election of a populist government in October”

The IMF - which handed over a record $56 billion last year to bailout Macri - is hopeful...

"Breaking inflation inertia remains a difficult challenge for the Argentine authorities," IMF chief spokesperson Gerry Rice said in a statement. "Their current monetary policy framework is appropriately designed to tackle this challenge."

But their hope is definitely not consensus:

“With observed and expected inflation both rising, the BCRA is left in an uncomfortable situation. In our view, there are not many options left for the monetary authority, which has already announced even stricter targets for monetary base last month.” -Adriana Dupita, Bloomberg economist Argentine March inflation data show price pressures remain highly generalized and is “very negative and worrisome” - Alberto Ramos at Goldman Sachs.

But Bloomberg's Sebastian Boyd sums up the farce best: the measures the government and bank are taking are short-sighted and damaging. Price controls and FX manipulation are part of what got Argentina into this mess and are aimed at boosting president Mauricio Macri's re-election chances -- at the expense of economic orthodoxy. It's a sign of weakness and fear.