By Jorge Otaola
BUENOS AIRES, Feb 15 (Reuters) - Argentina's central
bank is set to hold its benchmark interest rate steady at 75%
this week despite inflation gaining pace once more, but hopes of
a potential rate cut early this year are fading as prices heat
up, bank sources told Reuters.
The South American country hiked rates through most of last
year. It put the breaks on monetary tightening in October, and
has since left the benchmark rate unchanged on hopes that
inflation, running near 100% annually, was cooling.
Although monthly inflation has ticked up since December, the
central bank is not expected to make a new hike. Consumer prices
rose 6% in January and inflation clocked in at 99% on an annual
basis, the government said on Tuesday.
An official central bank source said a rate hike debate was
not expected to be "on the agenda" ahead of the board's weekly
meeting on Thursday. The bank normally makes rate decisions
mid-month, though these can come at other times.
A central bank adviser told Reuters on condition of
anonymity that the rate was unlikely to be raised or lowered
this month.
A period of slowing inflation in the second half of last
year had seeded hopes that there could be a cut in early 2023.
"At the end of last year it was thought that inflation would
decrease slowly and for this reason a possible drop in rates was
even analyzed, but now the reality has changed and it does not
seem appropriate to make monetary changes," the person said.
"It will be important to see the trend of core inflation,
without forgetting the external financial context."
NO GREAT PRESSURE
Analysts agreed a hike was unlikely.
"It should be held steady given that the nominal annual
monetary policy rate of 75% is consistent with inflation of
almost 6.3% per month," said Roberto Geretto at Argentina
investment fund Fundcorp.
"Even if it goes slightly above this number, there would be
no great pressure from that side to raise (rates)."
Mauro Mazza of Bull Market Brokers said he expected the bank
to leave both the benchmark 'Leliq' rate and repo rates steady.
He flagged worries about rising Treasury issuance, with the
government raising the rates it offered to roll over debt.
Argentina holds elections in October, with the embattled
Peronist ruling coalition fighting to avoid defeat by the
conservative opposition, which leads in the polls with voters
worried about inflation and economic malaise.
The government might walk a fine line between tamping down
inflation and supporting growth, said Gustavo Ber from the
consulting firm Estudio Ber.
"It is an election year, and all decisions will be
short-term," he said. "It seems unlikely the BCRA (central bank)
will move the rate now."
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Argentina: inflation spirals (Interactive graphic) Battling inflation in Argentina (Interactive graphic) Battling inflation in Argentina Argentina: inflation spirals ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Jorge Otaola; Editing by Adam Jourdan and David
Gregorio)
Messaging: adam.jourdan.thomsonreuters.com@reuters.net))
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