Argentina’s Central Bank Lowers Rates for Eighth Time Under Milei

Argentina’s economy is showing signs of recovery as the Central Bank cuts interest rates again. The benchmark rate now stands at 32%, down from 35%. This marks the seventh reduction in 2024 and the eighth since President Javier Milei took office. The move reflects growing confidence in the country’s economic stability.

When Milei assumed the presidency in December 2023, Argentina faced rampant inflation. The benchmark interest rate stood at a staggering 133%. His administration swiftly implemented bold fiscal and monetary policies. These measures aimed to curb inflation and stabilize the economy.

The results are becoming evident. Annual inflation, which peaked at 193% in October 2024, is now on a downward trend. Monthly inflation has dropped from over 25% in late 2023 to around 2.8% in November 2024. Experts project inflation to close at 118.8% for 2024, with further deceleration expected in 2025.

The exchange rate has also shown improvement. The official rate is expected to reach 1,021 pesos per dollar by year-end. Parallel exchange rates have been declining, with most now below 1,100 pesos per dollar. This stability has made peso investments more attractive, offering good returns in dollar terms.

Argentina’s Central Bank Lowers Rates for Eighth Time Under Milei

However, the path to recovery has not been without challenges. The economy is projected to contract by 3% in 2024. Milei’s administration has implemented sharp budget cuts, leading to increased poverty levels. Yet, many argue these measures are necessary for long-term economic stability and growth.

The Central Bank’s decision extends beyond the benchmark rate. The interest rate on active repurchase agreements was reduced from 40% to 36%. These new rates took effect on December 6, 2024. The move aims to stimulate private credit by making government securities less attractive to banks.

Looking ahead, the economic outlook appears cautiously optimistic. Inflation is expected to continue declining, potentially reaching 2% by May 2025. The unemployment rate is projected to be around 8% by the end of 2024. Exports are forecast to reach $78.74 billion in 2024, with imports at $60.85 billion, resulting in a trade surplus.