Argentina: Central Bank Slashes Interest Rate, Citing Lower Inflation Expectations
Argentina: Argentina’s central bank cut its benchmark interest rate to 35% on 1st Nov 2024, marking a 500 basis point decrease and boosting local markets. The unexpected move, reflecting optimism about controlling the nation’s triple-digit inflation, is the seventh rate cut since libertarian President Javier Milei took office in December, when the rate was 133%. On this news, bond prices rose by an average of 2%, and the country risk index fell. The central bank attributed its decision to improved liquidity and lowered inflation expectations, alongside the government's "strengthening of the fiscal anchor."
Under Milei’s administration, annual inflation has dropped from over 200% to monthly inflation rates of around 3.5%, down from over 25% in late 2023. Despite these gains, Argentina’s annualized inflation rate remains high at 209%, and economic growth has slowed, with poverty rates exceeding 50%. The government has implemented severe fiscal cuts, including reductions to energy and transportation subsidies, which have helped reduce the fiscal deficit but deepened recession.
Additionally, on 31st Oct 2024, the government reported that its tax amnesty program brought $18 billion back into local banks, with the initial stage of the program extended until November 8.
Source: Reuters