Argentina’s central bank cut its main interest rate for the third time since President Javier Milei took office as investors bet on a fresh inflation slowdown in the South American nation.

Policymakers lowered rates to 70 per cent from 80 per cent on Thursday, according to a person with direct knowledge of the matter. The drop was later confirmed by a central bank statement and communicated to traders on the local Siopel system. 

Borrowing costs have fallen from 133 per cent in December, when the reference instrument was the Leliq note.

Argentina will publish consumer price data on Friday and economists are expecting the third straight slowdown in the month-on-month increase. At the same time, authorities are trying to rein in the amount of the money the central bank must issue to pay its liabilities, thus further reducing cost-of-living pressures. Still, annual inflation is running at a three-decade high of 276 per cent. 

The cut clashes with February guidance from the International Monetary Fund in its latest review of Argentina’s $44 billion program. At that time, staff wrote that “going forward, the authorities agreed that the monetary policy stance would need to be tightened to support money demand and disinflation.” 

More broadly, IMF officials have long insisted Argentina keep interest rates above inflation to encourage savings in pesos and cool prices.

In additional measures, the central bank ended its credit swap with the Bank for International Settlements, according to the statement. It also increased reserve requirements for interest-bearing accounts of money market mutual funds to 10 per cent from 0 per cent. 

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