October 25, 2016 / 10:07 PM / 2 years ago

Argentina central bank holds policy rate steady for fifth straight week

BUENOS AIRES, Oct 25 (Reuters) - Argentina’s central bank kept its reference rate unchanged at 26.75 percent for the fifth straight week on Tuesday as it said recent indicators suggested inflation was falling in line with its expectations.

A central bank poll of economists this month showed expectations for inflation of 39.6 percent in 2016 and 20 percent in 2017. The bank’s inflation target for next year is 12 percent to 17 percent, while the government sees it at 17 percent.

The central bank said in a statement that key indicators it monitors “show an evolution of prices during the month of October in line with the path of disinflation foreseen by the monetary authority.”

Consumer prices rose 1.1 percent in September, up from 0.2 percent in August but lower than earlier months this year largely because the Supreme Court ordered the government to suspend subsidy cuts that had lifted home heating gas prices.

The central bank expects monthly inflation rates of 1.5 percent or less during the final quarter of this year.

Also on Tuesday, government data showed that Argentina’s economy shrank 2.6 percent in August from the same month a year earlier, the fifth straight month of year-on-year declines, in a sign recession continues.

Economic activity has now fallen 2.3 percent cumulatively this year when compared with the first eight months of last year. But the 2.6 percent year-on-year decline was smaller than the 6 percent drop registered last month, and activity rose 0.2 percent in August over July, marking the first time since March that the economy grew with respect to the previous month.

Reporting by Luc Cohen; Editing by Lisa Shumaker

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