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LatinNews Regional Monitor: Brazil & Southern Cone - 10 January 2018

In brief: Argentina

Argentina: The central bank (BCRA) has cut its benchmark interest rate by 75 basis points to 28%, a smaller reduction than the 200 basis points that had been expected by the local market. The BCRA has been under pressure from the government led by President Mauricio Macri to significantly reduce interest rates to help stimulate domestic economic growth. But the BCRA board led by Federico Sturzenegger has been reluctant to lower the benchmark interest rate until Argentina’s high inflation rate, which is currently running at around 21%, is brought under control and falls to around 10%. The lower-than-expected interest rate cut points to ongoing differences of opinion between BCRA and the Macri executive, even after a joint meeting in late December 2017 between BCRA and government officials after which it was announced that the bank’s official inflation target for 2018 had been relaxed to 15%, up from Sturzenegger’s preferred 10%.