By Jorge Otaola
BUENOS AIRES (Reuters) – Argentina’s central bank (BCRA) board members are set to hold the benchmark interest rate steady at 118% this month, two sources familiar with the matter said on Thursday, despite the country’s inflation rate hitting an over 30-year high in August.
“I don’t see them (board members) raising the rate for a month,” one of the sources told Reuters. The bank board usually meets weekly on Thursday, though monetary policy decisions can be taken at any time.
August inflation data published on Wednesday showed annual inflation running at over 124%, with the monthly rate at 12.4%, its highest level since 1991, deepening a cost-of-living crisis ahead of the next presidential elections scheduled for October.
“The political cost of raising it is too high,” a second official source said.
Argentina raised the benchmark interest rate to 118% from 97% after a shock open primary election last month where radical libertarian Javier Milei got 30% of the vote, making himself the favorite to win the presidential election in October.
Analysts, meanwhile, said that the benchmark rate ought to be lifted to around 149% to curb price rises, with a central bank poll estimating inflation to end the year at around 169%.
The first source, however, said that the bank hoped inflation in September would moderate a bit.
“August inflation was higher than expected, so September’s will come lower than first anticipated… according to all high-frequency indicators,” the source said.
Argentina is facing a looming recession after drought disrupted its key farm sector, negative foreign currency reserves and a weak peso, at the same time as battling to salvage a $44 billion deal with the International Monetary Fund (IMF).
(Reporting by Jorge Otaola; Writing by Valentine Hilaire; Editing by Marguerita Choy)
