By Jorge Otaola
BUENOS AIRES (Reuters) – Argentina’s central bank cut its benchmark interest rate by 500 basis points to 35% on Friday in a surprise move, signaling growing optimism that it can tame the country’s triple-digit inflation.
The cut was the seventh time the policy rate has been lowered since outsider libertarian President Javier Milei took office in December when it was 133%.
Milei has targeted the country’s inflation rate, long a drag on savings and economic activity. While annual inflation remains above 200%, monthly inflation has dropped sharply to around 3.5% from over 25% at the end of 2023.
“The decision is based on the liquidity context and the drop observed in inflation expectations,” the central bank said in a statement, which also pointed to the government’s “strengthening of the fiscal anchor.”
Milei’s government has overturned a deep fiscal deficit with major spending cuts, but the measures have hit economic growth and deepened a recession, while pushing up poverty rates over 50%.
At 209%, Argentina’s annualized inflation rate remains among the world’s highest, though it has come down consistently in recent months, reaching its lowest level since late 2021 in September.
Milei has presided over tough spending cuts during his roughly 11 months in office, including the elimination of energy and transportation subsidies.
On Thursday, official data showed the government’s tax amnesty scheme lured around $18 billion back into local banks, with the program’s initial stage extended through Nov. 8.
(Reporting by Adam Jourdan; Writing by Aida Pelaez-Fernandez; Editing by David Alire Garcia and Richard Chang)
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