Argentina holds rate, sees disinflation resuming in May

    Argentina’s central bank maintained its monetary policy rate at 26.25 percent for the second consecutive policy decision, saying estimates and data from state and private sources suggest inflation will resume its decline in May while it was higher than hoped for in April.
     The Central Bank of Argentina (BCRA), which surprised many economists by raising its rate by a sharp 150 basis points on April 11, said a recent poll of analysts showed that expectations for general inflation in 2017 declined to 21.0 percent from 21.2 percent in March.
     This, however, is still above the central bank’s 2017 target of 12-17 percent.
     For 2018 inflation expectations declined to 14.6 percent from 15.0 percent, also above the BCRA’s 2018 target of 8-12 percent.
     Argentina’s inflation rate rose to a 2017-high of 40.5 percent in April from 35 percent in March, with inflation volatile as the government continues to remove energy and transport subsidies to reduce the federal deficit.
     The government of President Mauricio Marcie has vowed to tackle inflation and under its current governor, Federico Sturzenegger, the central bank has adopted inflation targeting. The central bank currently issues monetary policy statements twice a month.
     The BCRA’s rate hike in April, its first this year, came after surveys showed that inflation expectations for this year had risen to 21.2 percent from 20.8 percent.
     In today’s statement, the central bank noted that when it launched its inflation targeting scheme in September 2016 it had said it would use a national consumer price index as its reference index instead of consumer prices in Buenos Aires.
     The national statistics office INDEC will start publishing a national CPI in July and the central bank said it would combine this with the IPC-GBA index during a transition period. The central bank added that both monetary authorities and analysts expect the two indices will be similar.
    Last month the International Monetary Fund (IMF) forecast that Argentina’s inflation rate would reach 21.6 percent this year.

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