Argentine stocks surged in Tuesday’s session following lower-than-predicted February inflation figures and an unexpected move by the central bank, which slashed interest rates by 20 percentage points down to 80% a day earlier.
The Global X MSCI Argentine ETF ARGT, which tracks the performance of an index of Argentine stocks, closed 1.3% higher, snapping a three-day losing streak.
Government data published on Tuesday revealed that in February, consumer prices experienced a 13.2% rise from the preceding month, which was lower than the 15% gain anticipated by economists.
On an annual basis, price pressures escalated by 276.2%, marking the sharpest increase since Argentina emerged from hyperinflation in the early 1990s.
According to a government statement, the monthly inflation slowdown is the result of the fiscal discipline implemented by the new administration.
President Milei remarked that the work of Finance Minister Luis Caputo “is remarkable,” as reported by local newspaper La Nacion.
In the same vein, he asserted that he “won’t yield even an inch” in his fiscal adjustment plan.
“We are going to return to respecting the zero deficit in February, despite a drop in revenue. We have continued with the plan of the chainsaw and the blender; the decrease in public spending is 36%. We won’t give up even a millimeter,” Milei stated.
Prior to the inflation data, the Central Bank of the Republic of Argentina (BCRA) slashed interest rates from 100% to 80%, bringing the cost of money to the lowest level in nearly a year.
Central Bank President Santiago Bausili highlighted that “a pronounced slowdown in inflation is observed,” despite the strong statistical drag that inflation brings to its monthly averages.
Policymakers observed a reduced impact compared to initial expectations from December’s currency intervention on the inflation outcomes.
In the coming months, the authorities of the BCRA will focus on the evolution of core inflation, in view of the announced adjustments to regulated tariffs for public services.
Milei Contemplates Dollar’s Inclusion as Legal Tender Alongside the Peso
Caputo stated Tuesday at the AmCham Summit 2024 in Buenos Aires that lowering inflation is the government’s primary objective.
He also remarked on Milei’s ongoing pursuit of a “competition of currencies,” envisioning the inclusion of the U.S. dollar as legal tender.
He highlighted that the currency competition scheme aims to swiftly collapse inflation. This came after he celebrated the government’s fiscal outcome.
The International Monetary Fund (IMF) is receptive to discussing a new program to replace Argentina’s existing $44 billion program, potentially involving additional funding, Caputo says.
Image: Wikimedia Commons
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