By Jorge Otaola
BUENOS AIRES (Reuters) – Argentina’s central bank is set to hold its benchmark interest rate steady at 97% in the near term with optimism that monthly inflation will slowly ease, two bank sources said on Thursday, a boost for the government ahead of primary elections next month.
The South American nation has annual inflation running at 114%, though the monthly CPI rise slowed slightly in May to 7.8% from a peak the month before. One of the sources, a central bank adviser, said inflation in June was expected to slow further.
“Inflation in June will be lower than that of May, so there is no reason to change the rate,” the adviser said.
A second source familiar with the bank’s decision making said the entity expected to hold the rate stable for now as inflationary pressures relented slightly. “I don’t see any change in the near term,” the person said.
Officials and bankers privately say they are hoping for June monthly inflation to be nearer 7%, still one of the highest levels in the world but down from the 8.4% peak in May, which forced the central bank into a series of huge rate hikes.
Inflation is nonetheless expected to end the year near 150%, which hammers earning and spending power. Around four in 10 Argentines live in poverty, the peso is sliding fast and the country’s foreign currency reserves are nearly depleted.
Argentines will go to the polls in mid-August in primary elections to elect candidates who will fight for the presidency in October, with the ruling Peronist coalition, hit hard by the economic crisis, chasing from behind in the polls.
(Reporting by Jorge Otaola; Writing by Adam Jourdan, Editing by Alexandra Hudson)
