September 28, 2018 / 3:56 PM / 25 days ago

Argentina central bank mulling rise in reserve requirements -media

BUENOS AIRES, Sept 28 (Reuters) - Argentina’s new central bank chief is considering raising reserve requirements and tightening how banks account for reserves to restrict money supply under a revised IMF deal signed this week with the aim of lowering inflation, local media reported on Friday.

Central bank Governor Guido Sandleris, appointed on Tuesday after his predecessor unexpectedly resigned, met with bank executives on Thursday to discuss raising reserve requirements but there is no date set for any announcement, newspapers Cronista and BAE reported, citing sources present in the meetings.

Sandleris announced on Wednesday that the central bank would target zero growth in the monetary base until June 2019 as part of the $57 billion financing deal with the International Monetary Fund, in addition to other measures to help stabilize consumer prices.

The central bank is also discussing a reduction in the amount of short-term debt, known as Lebac, allowed to replace hard cash in bank reserves, the reports said.

With interest rate increases by the U.S. Federal Reserve this year sucking dollars from emerging markets, Argentina has found itself at the center of a storm, as a drought unexpectedly tipped its economy into recession.

The peso has lost more than 50 percent of its value against the dollar this year as foreign investors fled amid concerns the government might be unable to service its debt next year.

Sandleris became central bank governor after his predecessor, Luis Caputo, resigned unexpectedly the day before the announcement of the revised financing agreement with IMF, the largest in the fund’s history.

IMF Managing Director Christine Lagarde said the agreement would boost loan disbursements by $19 billion through the end of 2019 to calm investor fears over whether Argentina can meet its obligations next year.

The program also introduces a trading band for the peso between 34 and 44 pesos per dollar, which depreciates daily at a rate equivalent to 3 percent per month. The measure is aimed at reducing market intervention by the central bank, which has spent $16 billion so far this year propping up the peso.

The peso was trading down 3.36 percent at 40.62 to the dollar on Friday amid concern over the economic impact of the tightening in monetary policy. Argentina’s monetary base has been growing at a hurried 2 percent per month.

Under Caputo, the central bank raised reserve requirements several times since July to reduce liquidity. (Reporting by Gabriel Burin Writing by Scott Squires Editing by Daniel Flynn and Steve Orlofsky)

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