BUENOS AIRES, Nov 8 (Reuters) - Argentina’s central bank lowered its reference rate by 50 basis points to 26.25 percent on Tuesday, citing lower inflation expectations as the reason for its first cut after keeping the rate unchanged for six straight weeks.
In a statement, the bank pointed to a survey it published last week showing economists expected inflation of 19.8 percent over the following 12 months, down from 21.3 percent in the prior month’s survey.
Argentina has swerved toward orthodox economic and monetary policy this year under President Mauricio Macri, who was elected 11 months ago on a free markets platform following eight years of leftist populism under previous leader Cristina Fernandez.
Economists expect inflation to reach nearly 39.4 percent in 2016 before falling to 19.7 percent in 2017 as the central bank’s new policy of targeting inflation takes hold.
Consumer prices rose 1.1 percent in September and 0.2 percent in August, lower than earlier months in the year largely because the Supreme Court ordered the government to suspend subsidy cuts that had lifted home heating prices. The cuts have since been restored, which may put upward pressure on inflation.
Speaking at a bankers’ conference on Tuesday, Finance Minister Alfonso Prat-Gay pointed to signs inflation was slowing, noting that private estimates showed average monthly inflation between August and October at 1.3 percent.
On an annualized basis, that would be below the government’s own expectation for 17 percent inflation in 2017, though Prat-Gay acknowledged that the low August and September figures reflected the lower gas tariffs.
At the conference, central bank chief Federico Sturzenegger reiterated the monetary authority’s target of 1.5 percent monthly inflation for the final three months of 2016.
Government statistics agency INDEC is expected to publish October’s inflation rate on Thursday. (Reporting by Luc Cohen and Hugh Bronstein; Editing by James Dalgleish)