Argentina Monetary Policy June 2018

Argentina

Argentina: Central Bank maintains rate unchanged at record-high 40.00%

June 27, 2018

At its latest meeting held on 26 June, the Central Bank of Argentina (Banco Central de la República Argentina, BCRA) decided to leave the 7-day repo reference rate unchanged at an all-time high of 40.00%. The decision matched market expectations, as the Bank attempts to restore confidence following a heavy devaluation of the peso and the intervention of the International Monetary Fund.

Stubbornly high inflation was behind the Central Bank’s decision. According to the National Statistics Institute (INDEC), national consumer prices rose 2.1% month-on-month in May, which was nevertheless below April’s 2.7% increase. However, according to the Bank, high-frequency indicators suggest the month-on-month increase in consumer prices accelerated in June, partly due to significant exchange rate instability in the past few weeks. Meanwhile, national inflation rose from 25.5% in April to 26.3% in May, well above the Bank’s target of 17.0% to be reached by the end of 2019.

The Bank stated that it remains ready to take additional actions to contain inflation if needed and considers the government's ongoing efforts to curb public expenditure as positive in terms of containing inflation. Therefore, it considers a tight monetary stance as essential to anchoring market expectations and bringing inflation to target.

Argentina Interest Rate Forecast


On average, panelists participating in the LatinFocus Consensus Forecast see the 7-day repo repurchase rate ending 2018 at 29.78%. They see the 7-day repo repurchase rate decreasing in 2019, closing the year at 19.68%.


Author: Jean-Philippe Pourcelot, Economist

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Argentina Monetary Policy Chart


Argentina Monetary Policy June 2018

Note: 35-day Lebac rate in %.
Source: Central Bank of the Argentine Republic (Banco Central de la República Argentina).


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