November 22, 2016 / 11:52 PM / in 2 years

Argentina central bank cuts policy rate for third straight week

Nov 22 (Reuters) - Argentina’s central bank on Tuesday cut its benchmark interest rate to 25.25 percent, lowering it by 50 basis points for the third straight week and said once again it was confident inflation would decline in line with its expectations.

After keeping rates unchanged for six straight weeks, the monetary authority has now dropped rates by 150 basis points total in the past three weeks, citing reduced inflation expectations.

Government data earlier this month showed inflation reached 2.4 percent in October, above the central bank’s target for average monthly inflation of 1.5 percent in the final three months of this year.

The high inflation rate in October was largely the result of the elimination of subsidies for natural gas, which sent home heating bills soaring. The subsidy cuts are a key element of President Mauricio Macri’s deficit reduction plan.

In a statement on Tuesday, the central bank said it had held rates steady between late September and early November to “prevent the increase in inflation in October, associated with the changes in tariffs, from impacting inflation subsequently.”

But it said the indicators and estimates it monitors suggested that in November, prices were in line with its goal for 1.5 percent average monthly inflation for the fourth quarter of 2016.

Economists expect full-year 2016 inflation to hit 39.4 percent before slowing to 19.7 percent in 2017. The central bank’s inflation target range for next year is 12 percent to 17 percent, while the government sees it at 17 percent. (Reporting by Luc Cohen; Editing by Andrew Hay)

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