Argentina Removes Interest Rate Floor, As Inflation Eases

Argentina seems to be gaining control on inflation, with the country’s central bank removing the 60% floor for its benchmark interest rate.

“As a result of the significant fall in inflation expectations for two consecutive months, and as contemplated, the 60-percent interest-rate floor has been eliminated,” reported the Buenos Aires Times quoting the country’s central bank as saying.

Controlling inflation was one of the conditions the South American country had agreed with the International Monetary Fund (IMF) in exchange for a US$56 billion bailout.

The international bank has welcomed the announcement, saying the country’s economy may soon start registering growth.

However, some economists are saying that inflation may hover at 47% this year, according to Reuters.

The South American country is going through a severe drought, which has reportedly damaged its soybeans and corn crop, one of the major sources of export revenue.

Its currency peso has been devalued repeatedly over the past few months, as the economy slid back into recession on the back of rising interest rates in the United States.

Rising inflation and interest rates were the key factors suppressing growth. Now, with the inflation moving downwards, the economy may pick up steam.

Moreover, President Mauricio Macri is doing everything he can to reverse the country’s economic fortune. Last week, he reached a currency swap deal with China as part of his bid to shore up peso.

China is among Argentina’s top export markets, especially for agricultural commodities. During the recent trip of President Xi Jinping to Buenos Aires, China announced as many as 30 agriculture and investment deals.