Tuesday, August 22, 2017

Argentina maintains rate as core inflation still too high

     Argentina's central bank maintained its monetary policy rate at 26.25 percent, as expected, confirming its view that disinflation is continuing but core inflation remains too high.
      The Central Bank of Argentina (BCRA) has kept its rate steady since a surprise 150 basis point hike in April after inflation expectations rose.
       As in its previous policy statement from Aug. 8, the BCRA said inflation in August is expected to be lower than in July as the process of disinflation continues but core inflation is still above its targeted level.
       Last month Argentina's national statistics institute for the first time published a national consumer price index for the month of June. The new index is used by BCRA to judge compliance of prices with it target of reducing inflation to between 12 percent and 17 percent this year and 10.0 percent, plus/minus 2 percentage points in 2018.
       As expected by the central bank, general consumer prices rose by 1.7 percent in July from June due to changes in regulated prices while core inflation was up 1.8 percent.
       However, the BCRA also said the annual general inflation rate declined to 21.4 percent in July from 21.8 percent in June and the core inflation rate eased to 22.5 percent from 22.6 percent.
      Argentina's inflation rate rose to a 2017-high of 40.5 percent in April, with prices driven higher by the government's removal of energy and transport subsidies to reduce the federal deficit.
     Argentina's peso has been firming in the last week after falling from May to early August. Today the peso was trading at 17.2 to the U.S. dollar today, down 7.8 percent this year.
      The country's president, Mauricio Marcri, let the peso float shortly after taking office in December 2015, removing many of the controls that previous governments had used to prop up the currency and protect foreign reserves.


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