Argentinian interest rate rises 200 basis points as inflation boils over

Band Jorge Otaola

BUENOS AIRES, June 9 (Reuters)Argentina’s benchmark interest rate is likely to be raised another 200 basis points next week, analysts polled by Reuters said, as the central bank look for to counter galloping and painful inflation that could exceed 70% this year.

The survey of seven analysts and traders said the bank would likely raise the rate to 51% from its current level of 49%, according to a median of responses. Estimates ranged from no change to the biggest increase of 350 basis points.

Inflation in the South American country is running at 58% and is expected to reach 72.6% by the end of the year, according to the latest analyst poll by Banco Central de la República Argentina (BCRA). The bank has raised the interest rate five times already this year.

“I think they will adjust the rate again by around 200 basis points, as part of a gradual strategy due to the impact on economic activity and the dynamics of growing peso debt,” he said. said Gustavo Ber, director of the consulting firm Estudio Ber.

“Yields will still be below inflation expectations, although they are on track to reduce this trend, in an effort to restore investors’ appetite for local currency instruments.”

The central bank’s board normally meets on Thursdays and the eventual rate change is expected at next week’s meeting.

Mauro Mazza, an analyst at Bull Market Broker, however, said there were signs of a slowdown in consumer price inflation.

“This could lead (BCRA PMiguel) Pesce to slow the rate of monetary adjustment,” said Mazza, who forecast the bank to hold the rate steady this month. “Technically speaking, we see no reason for a further hike.”

Argentina: rate vs inflation

Argentina: rate vs inflation (Interactive chart)

(Reporting by Jorge Otaola; Editing by Nicolas Misculin and Richard Chang)

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