As inflation eases, the Argentine peso will slow down
BUENOS AIRES (Reuters) – Argentina’s central bank said on Tuesday it would slow the rate of depreciation of the local peso as annual inflation eased in December and continued improvement in inflation.
Starting in February, the so-called inflation rate will be reduced to 1% per month due to the strengthening and expectations of a reduction in inflation (inflation) seen in the last few months. In inflation,” the central bank said in a statement.
Investors said the peso’s slow drag could extend a market rally fueled by President Javier Malé’s pro-market policies and hopes for fresh IMF funds.
Mille, who took office in December 2023, has initiated a nationwide austerity drive by cutting several public budgets. Poverty rates have risen, while inflation has slowed from double-digit monthly increases.
The central bank’s announcement came after official data showed monthly inflation rose sharply in December, although the annual rate slowed further as the government pushed for strong spending cuts and austerity measures.
“We are ruining inflation,” Argentina’s economy ministry said in a post on X.
A monthly rate of 2.7%, as predicted by analysts, means that South America’s second-largest economy ended Millen’s first full year in office with annual inflation of 117.8%. The rolling 12-month rate is down about 300% from its April peak.
Still, many Argentines are feeling the pinch in their wallets, with housing and utility costs leading December’s price hike.
“People say inflation is going down, but here we always receive goods at different prices, it’s going up,” said 77-year-old retiree Juan Carlos Gonzalez, who works in an office to make ends meet.
Analysts said seasonal price increases were behind a modest acceleration in November’s 2.4% monthly inflation rate, and markets welcomed the data as good news. Traders expect inflation to cool in 2025.
The December data “confirms the continuation of the inflationary process,” Economy Minister Luis Caputo said on X.
What’s next?
Traders have been betting that Argentina’s central bank will cut interest rates from the current 32 percent.
The central bank is expected to cut interest rates by 500 basis points ahead of inflation data on Tuesday.
As the central bank’s board meets every Thursday, a rate cut could come ahead of the Treasury bid on Wednesday, the company added.
(Reporting by Kylie Madry, Hernan Nesi and Jorge Otaola; Additional reporting by Walter Bianchi, Miguel Lo Bianco, Horacio Soria and Juan Bustamante; Editing by Sarah Moreland, David Gregorio, Cynthia Osterman and Matthew Lewis)
