© Reuters. FILE PHOTO: The facade of Argentina’s Central Bank is pictured, in downtown Buenos Aires, Argentina September 16, 2020. REUTERS/Agustin Marcarian/File Photo
By Jorge Otaola
BUENOS AIRES (Reuters) -Argentina’s central bank debated an interest rate hike at its directors meeting on Thursday, a bank source told Reuters, though decided to hold the benchmark level steady for now and keep monitoring inflation and outflows of deposits.
The South American country’s interest rate is currently at 133%, one of the highest levels in the world in a bid to bring down triple-digit inflation and encourage people to keep savings in the local peso currency despite rapid depreciation.
Two sources had earlier said a rate hike was on the cards.
“They changed their mind. There was a discussion and the idea prevailed that there was no need yet to raise rates,” an official bank source said. “They will watch how things develop in the coming days.”
The interest rate debate comes after libertarian economist Javier Milei won the South American country’s presidential runoff election on Sunday, with campaign pledges to dollarize the economy, close the central bank and abruptly cut spending.
He will take office on Dec. 10, replacing outgoing center-left Peronist President Alberto Fernandez, whose popularity nose dived as the country slumped into its worst economic crisis in two decades, with poverty over 40% and a recession looming.
Argentina has annualized inflation nearing 150%, negative net foreign currency reserves and a sliding peso, kept only in check by strict currency controls, which though have spawned parallel exchange rates far away from the official one.
Analysts said that a rate hike remained on the cards as the bank aims to stem recent signs of outflows of peso deposits from local banks into dollars as savers looked for a safe haven against potential reforms Milei makes once in office.