Argentina’s Central Bank decreased the annual benchmark interest rate to 60% on Thursday, its second reduction in April. Two weeks ago the monetary authority lowered the rate from 80% to 70%.

“The Central Bank of Argentina informs that as of April 25, the rate for one-day repo transactions is 60%,” Gustavo Quintana, an analyst and broker for PR Corredores de Cambio, posted on X. In December, the Central Bank board decided that the annual benchmark interest rate would be equal to that of one-day repo transactions.

The nominal rate for credit card operations up to AR$200,000 a month (US$218 at the official rate) remains unchanged at 122%. On April 11, the Central Bank deregulated the rest of the rates, such as those for fixed-term deposits. 

That day, the Central Bank said in a communiqué that the main reason for the rate reduction was the “downward trajectory of retail inflation” after the post-devaluation shock in December 2023. Month-on-month inflation decreased from 25.5% in December to 11% in March, but interannual inflation soared to 287.9% — more than three times the interest rate.

Quintana said the rate decrease is part of a series of decisions to force changes in the composition of the Central Bank’s liabilities, as it would discourage one-day repo transactions and encourage other types of debt.

“We will see how it works out and if this decision does not stimulate some kind of incipient dollarization, although this should not be significant due to the monetary restriction that remains in place,” he told the Herald.