Central Bank lowers key rate to 40%, extending cuts

The Central Bank extended the world’s deepest series of interest rate cuts, in an attempt to revive the shrinking economy.

Policymakers cut the key rate floor – the minimum level that rates are allowed to fall – to 40 percent, from 44 percent, the bank said in a statement.

“The decision was taken based on the deceleration in the inflation rate, and the prospect of this trend continuing,” the bank said in its statement announcing the decision. “The board of the Central Bank considers that interest rates that are excessively high could slow the recovery in economic activity.”

It’s the seventh cut since Central Bank chief Miguel Pesce took over in December with the new government of President Alberto Fernández. The benchmark Leliq rate has fallen 23 percentage points from 63 percent in mid-December.

Consumer prices in January cooled significantly more than expected, as the government froze some key prices. Inflation slowed to 2.3 percent in January from a month ago, compared to 3.7 percent in December.

Pesce justifies the rate cuts as a tool to help turn around Argentina’s economy, which is expected to contract for the third straight year in 2020. The previous Central Bank leadership hiked rates as high as 84 percent in an unsuccessful attempt to combat inflation.