In a move reflecting optimism towards a deceleration in inflation, Argentina's central bank has announced another reduction in its benchmark interest rate, marking the third adjustment since President Javier Milei assumed office.
The decision to lower the interest rate from 80% to 70% was initially disclosed by a source familiar with the matter, with official confirmation following through a central bank statement and notifications to traders via the local Siopel system.
This latest reduction continues the trend from a peak rate of 133% in December, linked to the Leliq note, as Argentina braces for new consumer price data expected to show a continued easing in inflation for the third consecutive month. The government is concurrently focused on limiting central bank liabilities to alleviate cost-of-living increases, despite inflation reaching a 30-year high at 276% annually.
These rate cuts contrast with the International Monetary Fund's (IMF) advice from February, which, after reviewing Argentina's $44 billion program, suggested a tightening of monetary policy to bolster money demand and support disinflation efforts. The IMF has historically advocated for maintaining interest rates above inflation levels to promote savings in the local currency and help stabilize prices.
Alongside the rate cut, the central bank has terminated its credit swap agreement with the Bank for International Settlements and raised the reserve requirements for interest-bearing accounts of money market mutual funds from 0% to 10%.
