(Bloomberg) – Argentina's central bank cut its key interest rate for the third time since President Javier Millay took office, as investors bet on a new slowdown in inflation in the South American country.
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Policymakers cut interest rates from 80% to 70% on Thursday, the people said. This decline was later confirmed in a central bank statement and communicated to local Siopel system traders.
Borrowing costs have fallen from 133% in December, when the standard financial instrument was Relic bonds.
Argentina will release consumer price data on Friday, with economists expecting the month-on-month rate of increase to slow for the third consecutive year. At the same time, authorities are trying to rein in the amount of currency central banks have to print to pay debts, further easing pressure on the cost of living. Still, annual inflation remains at a 30-year high of 276%.
Read more: Millay sees long road ahead to deliver promised Argentina reforms
The cuts clash with February guidance from the International Monetary Fund in its latest review of Argentina's $44 billion plan. “The authorities agreed that going forward, the authorities need to strengthen their monetary policy stance to support financing needs and defuse inflation,” staffers wrote at the time.
More broadly, IMF officials have long advocated for Argentina to keep interest rates above inflation to encourage peso savings and keep prices in check.
As an additional measure, the central bank has terminated its credit exchange with the Bank for International Settlements, the statement said. It also increased reserve requirements for interest-bearing money market mutual fund accounts from 0% to 10%.
–With assistance from Robert Jameson.
(Confirmation updated in second paragraph, additional measures in final paragraph)
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