Sixth interest rate cut in Argentina during Milei period
Argentina reduced the policy rate to 40 percent after the inflation trend slowed down.
Argentina lowered its policy rate for the sixth time under President Javier Milei.
In addition to interest rate cuts, it was also observed that the central bank narrowed its balance sheet.
The Central Bank of Argentina reduced the policy interest rate from 50 percent to 40 percent. In December, the policy rate in the country reached the level of 133 percent.
Argentina’s monthly inflation has slowed since Milei took office on December 10, falling from 26 percent in December to 8.8 percent in April.
The economic team expects that trend to continue, with consumer price growth forecast to slow to 3.8 percent by September, according to a presentation seen by Bloomberg News.
This rate is much lower than the 5.8 percent expected by analysts surveyed by the central bank. However, annual inflation continued to remain high at 289.4 percent in April.
In a separate press release, the Central Bank of Argentina said that in addition to reducing the policy interest rate, it would also intervene in the secondary bond market without taking into account the 2 percent price difference determined by the current regulation.
On Monday, an International Monetary Fund mission completed the eighth review of Argentina’s $44 billion program. If approved by the IMF board, the move would give the country about $800 million in breathing room to meet debt repayments to the Washington-based lender.
While Milei’s monetary policy runs counter to the IMF’s orthodox recommendation for real positive rates, officials expect low borrowing costs to allow the central bank to clean up its debt-laden balance sheet and absorb excess liquidity, key steps before lifting capital controls.