Argentina Takes a Bold Step: Slashes Interest Rate to 35% in Bid to Tame Inflation

Seventh Interest Rate Cut in Argentina: A Shift from 133% to 35% in 11 Months

Argentina’s Central Bank (BCRA) announced a 5-percentage-point decrease in its benchmark interest rate, from 40% to 35%, on the 1st of this month.

The decision was made by the board of directors, citing the current liquidity situation and lower inflation expectations. The interest rate cut is part of the government’s fiscal strategy to strengthen price stability.

Since President Millais took office, the base interest rate has been adjusted seven times: from 133% to 100% on December 18 last year, 100% to 80% on March 12, 80% to 70% on April 11, 70% to 60% on April 25, 60% to 50% on May 2, 50% to 40% on May 14, and now from 40% to 35%.

Economists believe the interest rate cut is a result of the Millay government’s optimism about the inflation outlook. The monthly inflation rate in September was 3.5%, and some experts predict that the inflation rate in October will be below 3% for the first time since November 2021.

Argentina’s inflation rate in September was 209% compared to the same period last year, significantly higher than Korea’s 1.6%. However, the continuous decline in inflation is considered a great achievement of the Millais government.

Lucio Garay, an analyst at Ecoco Consulting, expressed concern that the interest rate cut may cause pesos to flock to dollars, despite its positive effects on lending and government financing costs.

The Argentine government has expressed confidence in stabilizing prices, forecasting an inflation rate of 18.3% per year in its 2025 budget.

The International Monetary Fund (IMF) recently released its World Economic Outlook report, assessing that Argentina’s economy is gradually recovering and predicting that next year’s inflation rate will reach 45%.