Argentina’s central bank expects to hold its benchmark interest rate at 97% through the August primary elections as officials estimate monthly inflation slowed in June, according to two people with direct knowledge of the matter.
(Bloomberg) — Argentina’s central bank expects to hold its benchmark interest rate at 97% through the August primary elections as officials estimate monthly inflation slowed in June, according to two people with direct knowledge of the matter.
Central bank officials expect monthly price increases slowed to less than 7% last month, justifying the rate hike pause, according to the people, who asked not to be named to discuss upcoming policy decisions.
The monetary authority is reluctant to cut the benchmark rate, one of the world’s highest, given the election uncertainty and pressures on the exchange market ahead of the primary vote. One of the officials sees July monthly inflation similar to June.
Argentina’s central bank raised rates from 75% to 97% from March to May in a bid to cool prices running at the fastest pace in decades.
Read More: Inflation Eats Into Argentines’ Wages Despite Tight Labor Market
Annual inflation has surged into triple-digit territory as money printing, a record drought and persistent fears of an abrupt currency devaluation fuel more price hikes ahead of a wide open presidential election. The index unexpectedly cooled for the first time in six months last May, breaking a streak even as price pressures remained very high.
Economists surveyed by Argentina’s central bank see prices rising 149% annually by the end of this year and a 3% contraction in gross domestic product. The government faces an uphill battle in the Oct. 22 general election amid a deep economic crisis. Investors hope a shift toward a pro-business government will put an end to years of financial mismanagement in the country.
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