January 3, 2017 / 10:40 PM / 2 years ago

UPDATE 1-Argentina's 7-day reference rate debuts at 24.75 pct

(Adds economic growth forecasts, policy and mid-term election political context)

By Hugh Bronstein

BUENOS AIRES, Jan 3 (Reuters) - Argentina’s central bank on Tuesday announced a seven-day monetary policy rate of 24.75 percent, unchanged from the 35-day reference rate it had maintained for the previous four weeks.

The bank released a statement saying that December inflation was likely to be under 1.5 percent, a figure would show that consumer price increases are decelerating in line with the bank’s objectives.

In September, the bank said it will continue to set its policy rate on a weekly basis in 2017 but no longer tie the rate to short-term Lebac securities. It will instead use the seven-day interbank lending rate as its reference rate.

Consumer prices are estimated to have risen about 40 percent in 2016 with the economy in recession. Inflation is seen at 21 percent this year and 14.9 percent in 2018, according to a poll of analysts released by the central bank earlier on Tuesday.

“The central bank will continue to maintain a clear anti-inflationary bias to ensure that the disinflation process continues toward its target of inflation between 12 percent and 17 percent during this year,” the statement said.

The bank began targeting inflation last year after unorthodox monetary policymakers under Argentina’s previous president, Cristina Fernandez, relied on printing pesos to keep the economy afloat during her two terms.

Gross domestic product is expected to grow 3 percent this year, according to the median forecast given by the 50 analysts polled by the central bank. The estimate was unchanged from the previous month’s central bank poll but well under the government’s forecast of 3.5 percent economic growth in 2017.

President Mauricio Macri was elected a year ago on a platform of dismantling Fernandez’s trade and currency controls. He has made sweeping policy changes, but the wave of foreign investment that he promised has been slow to manifest itself.

He needs to get the economy moving ahead of October’s mid-term elections, which will determine his ability to get the rest of his free-market reform program through Congress before the end of his first term in 2019. (Editing by Steve Orlofsky and Lisa Shumaker)

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