Argentina’s benchmark interest rate is expected to rise another 200 basis points next week, according to Reuters surveyed economists, as the central bank works to combat surging and punishing inflation that might reach 70% this year.

According to the median of the replies from a poll of seven experts and traders, the bank would likely raise the rate to 51 percent from its current level of 49 percent. The projections varied from no change to a 350 basis point increase.

According to the most recent Banco Central de la Republica Argentina survey of experts, inflation in the South American nation is at 58 percent and is expected to reach 72.6 percent by the end of the year (BCRA). This year, the bank has raised interest rates five times.

“I think they will adjust the rate again by some 200 basis points, under a gradual strategy due to the hit to economic activity and the dynamics of the growing debt in pesos,” said Gustavo Ber, president of the consultancy company Estudio Ber.

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

The central bank board meets on Thursdays, and a potential rate adjustment is likely during the meeting next week.

However, Mauro Mazza, an analyst with Bull Market Broker, said that there were indicators that consumer price increases were slowing.

“This could lead (BCRA President Miguel) Pesce to slow down the rate of monetary adjustment,” said Mazza, who predicted the bank will keep the rate unchanged this month. “Technically speaking, we see no reason for a new hike.”

Source: Reuters


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