World Economy

Argentina Cuts Key Interest Rate

Argentina Cuts Key Interest RateArgentina Cuts Key Interest Rate

Argentina’s central bank cut its 35-day reference rate 75 basis points to 31.5%, as part of its campaign to stimulate growth in Latin America’s No. 3 economy.

The bank issued $4.98 billion worth of short- and medium-term “Lebac” bonds in Tuesday’s weekly debt auction. It has slashed the 35-day interest rate a total of 650 basis points in central bank debt auctions over the last seven weeks amid growing discontent over the stagnant economy, Reuters reported.

By cutting the rate and making local bonds less attractive, policymakers hope banks and businesses will direct more cash toward bricks and mortar investment needed to stimulate growth.

Private economists and the International Monetary Fund expect Argentina’s economy to shrink this year followed by modest growth in 2017. The government has not yet published an official gross domestic product forecast for 2016 or 2017.

The administration of new President Mauricio Macri is revamping Argentina’s statistics agency after years of issuing data widely discredited by the markets as inaccurate.

Free-markets proponent Macri won the presidency in November after eight years of heavy currency and trade controls under his predecessor, Cristina Fernandez.

Macri shut down the official Indec statistics agency soon after his December inauguration. The newly-reorganized Indec is set to issue its first GDP data late this month.

Last week it reported May inflation of 4.2% month on month, the first consumer price data published by the Macri administration.