Argentine Central Bank Poised to Slash Interest Rates Amid Slowing Inflation

The Argentine central bank is expected to cut its benchmark interest rate by 5-10 percentage points, following signs of slowing monthly inflation and a successful Treasury debt auction, amidst a deepening recession and severe austerity measures implemented by President Javier Milei's government. The rate cut aims to stimulate economic growth and provide relief to struggling Argentines, but its effectiveness is uncertain amidst a backdrop of soaring poverty, plummeting consumer spending, and a shrinking economy. This description focuses on the primary topic of the interest rate cut, the main entities involved (Argentine central bank, President Javier Milei, and the Argentine economy), the context of a deepening recession and austerity measures, and the significant actions and implications related to the subject matter. The description also provides objective and relevant details that will help an AI generate an accurate visual representation of the article's content, such as the economic landscape and the impact on everyday Argentines.

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Bijay Laxmi
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Argentine Central Bank Poised to Slash Interest Rates Amid Slowing Inflation

Argentine Central Bank Poised to Slash Interest Rates Amid Slowing Inflation

The Argentine central bank is expected to cut its benchmark interest rate by 5-10 percentage points this week, following three similar cuts since April, amid signs of slowing monthly inflation and a successful Treasury debt auction in Buenos Aires. The overnight rate currently stands at 50%.

Argentina's monthly inflation rate eased sharply to a single-digit rate of 8.8% in April, the first time in half a year, according to data released by the government statistics agency. This marks a significant decrease from the 11% rate in March and a peak of over 25% in December when President Javier Milei took office.

Why this matters: The Argentine central bank's decision to cut interest rates has significant implications for the country's economic recovery and the livelihoods of its citizens. As Argentina navigates a deepening recession, the effectiveness of these rate cuts in stimulating growth and providing relief to struggling Argentines will be closely watched by economists and policymakers worldwide.

President Milei's severe austerity program, aimed at fixing the country's troubled economy, has been praised by the International Monetary Fund (IMF) and cheered by market watchers. "Everything is set for the (interest) rate to continue falling this week in view of Thursday's bill tender," said a Buenos Aires-based trader. "Everything indicates that the low rate is about to fall," a second trader source added.

However, the austerity measures have also squeezed families, with their money plummeting in value while the cost of nearly everything has skyrocketed. Annual inflation climbed slightly to 289.4%, while the IMF expects Argentina's gross domestic product to shrink by 2.8% this year. Experts warn that falling inflation isn't necessarily an economic victory, but rather a symptom of a painful recession.

Signs of an economic slowdown are evident in Buenos Aires, with long lines outside discounted groceries, empty seats in restaurants, and growing strikes and protests. Retail sales in the first quarter of 2024 fell nearly 20% compared to the year before, and the consumption of beef dropped to its lowest level in three decades.

"Inflation is being pulverized. Its death certificate is being signed," said Manuel Adorni, presidential spokesperson. President Milei himself declared, "The important thing is to score goals now. We are beating inflation." However, many Argentines are struggling, with 60% of the population living in poverty, a 20-year high. "People are in pain," said Augustin Perez, a 23-year-old supermarket worker. "They say things are getting better, but how? I don't understand."

The central bank's expected interest rate cut this week comes as Argentina faces a challenging economic landscape. While the government touts the slowing inflation as a victory, falling prices appear to be largely driven by a collapse in consumer spending and a deepening recession. As the country grapples with the social costs of austerity, it remains to be seen if lower interest rates can stimulate growth and provide relief for struggling Argentines.

Key Takeaways

  • Argentina's central bank expected to cut interest rate by 5-10 percentage points.
  • Monthly inflation rate eased to 8.8% in April, a single-digit rate for the first time in half a year.
  • President Milei's austerity program praised by IMF, but criticized for squeezing families.
  • Annual inflation climbed to 289.4%, with GDP expected to shrink by 2.8% this year.
  • 60% of Argentina's population lives in poverty, a 20-year high, despite slowing inflation.