(Bloomberg) — Argentina's central bank cut its benchmark interest rate for the third time since President Javier Milei took office, as investors bet on a renewed slowdown in inflation in the South American country.
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Policymakers on Thursday cut interest rates from 80% to 70%, according to a person with direct knowledge of the matter. The decline was later confirmed by a central bank statement and communicated to traders in the local Siopel system.
Borrowing costs have fallen from 133% in December, when the reference instrument was the Leliq bond.
Argentina will release consumer price data on Friday and economists expect a third straight slowdown in monthly increases. At the same time, authorities are trying to curb the amount of money the central bank has to spend to pay its liabilities, further easing pressure on the cost of living. Nevertheless, the annual inflation rate is 276%, its highest level in three decades.
Read more: Milei sees a long road ahead to implement the reforms he promised in Argentina
The cut contradicts the International Monetary Fund's February guidance in its latest review of Argentina's $44 billion program. At the time, the staff wrote: “Going forward, the authorities agreed that the monetary policy stance needed to be tightened to support money demand and reduce inflation.”
In general, IMF officials have long insisted that Argentina keep interest rates above inflation to encourage peso saving and cool prices.
In further action, the central bank ended its credit swap with the Bank for International Settlements, according to the statement. Additionally, reserve requirements for interest-bearing money market fund accounts were increased from 0% to 10%.
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– With assistance from Robert Jameson.
(Updates with confirmation in second paragraph, additional measures in last paragraph)
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