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Argentina central bank holds rate, warns of higher Feb. inflation
February 21, 2017 / 8:52 PM / in 10 months

Argentina central bank holds rate, warns of higher Feb. inflation

BUENOS AIRES, Feb 21 (Reuters) - Argentina’s central bank kept its monetary policy rate unchanged at 24.75 percent for the twelfth consecutive week on Tuesday, though it said inflation in February would likely be higher than in previous months as a result of increases in regulated prices.

Consumer prices in greater Buenos Aires rose 1.3 percent in January, far below expectations and in line with the central bank’s target for inflation between 12 and 17 percent in 2017.

But a hike in electricity prices took effect in February, and the government plans to continue raising prices of other public services in the coming months as part its effort to cut subsidies and reduce the fiscal deficit.

In a statement, the central bank did not cite “mixed signals” about the evolution of prices, as it had in recent weeks, instead noting that the indicators it monitors suggest that “inflation in February will show an increase with respect to the level of previous months.”

“Even though core inflation in January was slightly below a path consistent with our annual goal of 12-17 percent ... the outlook for February and expectations for increases in regulated prices in the coming months merit a cautious attitude,” the central bank wrote.

Inflation expectations for 2017 fell slightly to 20.8 percent, a central bank poll of economists showed earlier this month, down from 21 percent a month earlier but well above the bank’s target.

Consumer prices rose about 40 percent in 2016 with the economy in recession. Inflation slowed considerably in the second half of the year, clocking in at 1.6 percent in November and 1.2 percent in December.

Beginning in March, the central bank will make interest rate decisions every two weeks, rather than every week, as it moves to normalize monetary policy. (Reporting by Luc Cohen; Editing by Richard Chang)

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