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Argentina Central Bank Lowers Rate to 32% on Price Expectations - BLOOMBERG
(Bloomberg) -- Argentina’s central bank cut its benchmark interest rate by 300 basis points to 32% as inflation expectations fall.
The decision was announced in a Thursday statement that said the new rate takes effect on Dec. 6. The board decided to cut given the “consolidation observed in inflation expectations,” it added.
The decrease comes just hours after the central bank published its monthly survey of economists, which forecast that monthly inflation will be below 3% through May. Annual inflation was estimated to slow to 119% by the end of the year.
It’s the central bank’s eighth rate cut and the smallest since President Javier Milei took office a year ago when borrowing costs were 133%. Lowering interest rates has become one of the most unorthodox parts of Milei’s economic strategy to slow inflation.
“The Central Bank’s decision of lowering the rate is predictable as it seeks to continue bolstering the wider government’s objective of lowering inflation,” said Leonardo Anzalone, economist and director a Buenos Aires-based CEPEC. “We believe the next step will be to slow the crawling peg, with the intention of making it a stronger anchor for the disinflation path.”
Argentina is expected to release November inflation on Dec. 11. Its central bank does not announce ahead of time its monetary policy meetings. Its most recent cut was Nov. 1.
The cut “was a possibility, given that the annualized rate was well above inflation expectations for the coming 12 months,” said Sebastian Menescaldi, economist at Buenos Aires-based EcoGo.
The central bank’s annualized rate stands at 41.88%, Menescaldi added, noting that 12-month inflation expectations are at 28.1%. EcoGo is estimating the rate should end the year at 30%.
--With assistance from Jose Orozco.
