Borrowing costs in Argentina continued to fall from 133% in December last year; CPI fell to 8.8% in April, and Millay believes there will be more positive developments in the future
Argentina cut the benchmark interest rate for the sixth time during the new president, Javier Milei (Javier Milei), while insisting on reducing the size of the central bank's huge balance sheet because his administration believes that the inflation rate is declining. Argentina's monetary authority issued a statement on its website on Tuesday local time stating that the benchmark interest rate would be lowered from 50% to 40%. Argentina's benchmark borrowing costs have dropped significantly from their historic high of 133% in December last year. Argentina's CPI fell to 8.8% month-on-month in April, and Millay believes there will be more positive developments in the future.
Argentina cut the benchmark interest rate six times during the Millay administration — the central bank has slashed borrowing costs from 133% to 40%
According to information, since Argentina's new President Millet, who has the title of “Argentine Trump,” took office on December 10 of last year, he advocated so-called “shock therapy,” but Argentina's monthly inflation rate index has clearly slowed beyond expectations, falling from a high of 26% in December last year to 8.8% in April this year. His economic team believes this trend will continue. According to a research report, Millai's economic team predicts that consumer price increases will drop further to 3.8% in September. This is far below the 5.8% commonly expected by analysts in central bank surveys. However, the inflation rate under the April annual benchmark continued to operate at an all-time high, reaching 289.4%.
In addition to lowering the benchmark interest rate, the Central Bank of Argentina also stated in another press release on Tuesday evening local time that it will intervene in the secondary bond trading market as appropriate without considering the 2% price spread under current regulations.
On Monday, International Monetary Fund (IMF) staff signed the eighth review assessment of Argentina's $44 billion aid package. If approved by the International Monetary Fund's executive board, the move would give the country about $800 million in breathing space to pay off the size of its debt to the Washington-based international lender.
Although Argentina's monetary policy led by Millay is contrary to the IMF's orthodox economic recommendations on positive real interest rates, some Argentine officials expect that lower borrowing costs will enable the Central Bank of Argentina to clean up its heavily indebted balance sheet, and may absorb excess liquidity in the entire market as a key step before the capital controls are lifted as a key step before Millet is striving to lift capital controls.