Buenos Aires Times

economy TO 27.25 PERCENT

Dollar lurches toward 20 pesos after Central Bank applies rate cut

The Central Bank wants to see rates at between 24 and 25 percent. However, the government remains cautious about the impact of a rising dollar on prices.

Wednesday 24 January, 2018
Central Bank chief Federico Sturzenegger.
Central Bank chief Federico Sturzenegger. Foto:Cedoc/Perfil

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The Central Bank cut interest rates by 0.75 percentage points on Wednesday, prompting another surge in the value of the dollar against the peso.

The entity led by Federico Sturzenegger announced that it will cut interest rates to an annual rate of 27.25 percent. 

The Bank will sustain a policy of "measured" and "gradual" reductions to interest rates, said Sturzenegger, who wants to see rates at between 24 and 25 percent.

Exchange houses were selling the dollar at 19.77 cents and buying it at 19.26 by midday Wednesday. 

Total currency exchange transactions for Monday came in at US$845 million after a similar surge and rumours of an imminent announcement about rates on the part of the Central Bank. 

ON ALERT

The devaluation of the peso has been relentless since early December and has the government on alert. 

Any further hike in the dollar could translate to higher prices for consumers, whose patience with the country’s chronic inflation is always wafer thin. Already, the government has lowered its inflation target from 10 to 15 percent and private estimates have the figure much higher.

A rising dollar could also mean a significant increase in the cost of dollar-demoninated debt repayments for the government, which despite having expressed a desire to ease off debt financing in the near future saw the country’s foreign debt rise to US$216 billion in 2017, up 20.3 percent on 2016’s rate.

-TIMES


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