May 23, 2017 / 8:53 PM / a year ago

Argentina expects disinflation in May, holds key rate steady

BUENOS AIRES, May 23 (Reuters) - Argentina’s central bank kept its benchmark interest rate at 26.25 percent on Tuesday and said it believes the country’s inflation rate is easing in May.

It was the third monetary policy meeting since the bank raised its key rate on April 11, warning at the time of higher inflation expectations.

“The estimates and indicators from private and state monitors for the central bank suggest that in May the economy has returned to disinflation,” the bank said in a statement.

Consumer prices rose 2.6 percent in April, up from 2.4 percent in March, the government’s Indec statistics agency said earlier this month.

Twelve-month inflation through April was 27.5 percent, Indec said in its first 12-month reading since President Mauricio Macri took office in late 2015. Consumer price data published by the previous government was widely dismissed as inaccurate.

The bank is targeting 12-month inflation of 12 percent to 17 percent for the end of the year, though the latest central bank survey of economists puts it at 21 percent.

While the bank fights inflation, Macri is trying to get the economy moving ahead of an October mid-term election that could be crucial to his chances for getting more of his pro-market policy changes through Congress after eight years of free-spending populism under previous leader Cristina Fernandez.

At 40 percent, Argentina had one of the world’s highest inflation rates last year.

Reporting by Hugh Bronstein; Editing by Steve Orlofsky

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