Argentina’s Central Bank lowers benchmark interest for third time in four weeks

The nominal rate is now 50%, its lowest value since June 2022

Argentina’s Central Bank decreased the annual nominal benchmark interest rate to 50% on Thursday. It is the fifth reduction of the benchmark interest rate since Javier Milei took office — the last was on April 25 — and has reached its lowest nominal level since June 2022. With the latest decrease, the effective rate is 64.82%.

According to an official communiqué, the Central Bank board made the decision based “on the rapid adjustment of inflation expectations” as well as the fiscal surplus and the monetary contraction due to the government’s austerity measures and the seasonal decrease in Foreign Treasury payments.

The monetary authority’s survey of market expectations said in March that April’s month-on-month inflation would be 10.8% and that inflation for the year would be 189.4%. In March, inflation was running at 287.9% a year, according to the INDEC statistics bureau.

In December, the Central Bank board decided that the annual benchmark interest rate would be equal to that of one-day repo transactions.

The Central Bank deregulated the rest of the rates, such as those for fixed-term deposits, normally used by Argentines to escape currency fluctuations. With the benchmark interest rate at 50% and no Central Bank-imposed minimum rate, their nominal rate is expected to be close to 40%.

Federico Furiase, an advisor for the Economy Ministry, said in a post on X that the decrease means monetary issuance is expected to drop by AR$283 billion a month and that the pesos debt will migrate from the Central Bank’s repo transactions to the Treasury. With the lower interest rate, the government expects investors to buy the Letras Capitalizables (Lecap), a financial instrument issued by the Economy Ministry.


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