June 22, 2016 / 12:07 AM / 2 years ago

Argentina central bank cuts key interest rate 75 bps to 31.5 pct

BUENOS AIRES, June 21 (Reuters) - Argentina’s central bank cut its 35-day reference rate 75 basis points to 31.5 percent on Tuesday, as part of its campaign to stimulate growth in Latin America’s No. 3 economy.

The bank issued $4.98 billion worth of short- and medium-term “Lebac” bonds in Tuesday’s weekly debt auction. It has slashed the 35-day interest rate a total of 650 basis points in central bank debt auctions over the last seven weeks amid growing discontent over the stagnant economy.

By cutting the rate and making local bonds less attractive, policymakers hope banks and businesses will direct more cash toward bricks and mortar investment needed to stimulate growth.

Private economists and the International Monetary Fund expect Argentina’s economy to shrink this year followed by modest growth in 2017. The government has not yet published an official gross domestic product forecast for 2016 or 2017.

The administration of new President Mauricio Macri is revamping Argentina’s statistics agency after years of issuing data widely discredited by the markets as inaccurate.

Free-markets proponent Macri won the presidency in November after eight years of heavy currency and trade controls under his predecessor, Cristina Fernandez.

Macri shut down the official Indec statistics agency soon after his December inauguration. The newly-reorganized Indec is set to issue its first GDP data late this month.

Last week it reported May inflation of 4.2 percent month on month, the first consumer price data published by the Macri administration.

Reporting by Walter Bianchi and Hugh Bronstein; Editing by Diane Craft

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