Argentina raises rate another 100 bps to lower inflation

     Argentina's central bank raised its monetary policy rate for the second time in a row, saying this should increase the contractionary bias of its monetary policy and speed up the downward trend in core inflation so it converges toward the bank's inflation target of 10.0 percent, plus/minus 2 percentage points, by 2018.
      The Central Bank of Argentina (BCRA) has now raised its rate three times this year by a total of 400 basis points following increases in April, October and today.
       The BCRA's most recent survey of market expectations showed inflation expectations for the end of this year had risen to 23.0 percent from 22.0 percent and expected inflation in 12 months had risen to 17.3 percent from 16.9 percent.
       The central bank targets inflation between 12.0 and 17.0 percent this year but has not referred to this target in recent weeks. Instead, the central bank appears to be focusing on meeting its 2018 target range of 8-12 percent inflation. For 2019 the BCRA targets inflation of 5.0 percent.
       The recent survey showed that the general price level is expected to rise 16.0 percent in 2018, well above the BCRA's target.
        Data for October inflation have yet to be published but in September headline inflation rose to 23.8 percent from 22.8 percent in August while core inflation rose to 22.3 percent from 22.2 percent.
        The BCRA said high-frequency indicators showed core inflation had resumed its downward move in October but remains higher than wished for.
       "The monetary authority will try to accentuate the decrease in inflation and minimize the impact of the next increase in regulated prices," the BCRA said.
       Argentina's economy grew by an annual rate of 2.7 percent in the second quarter of this year, up from 0.4 percent in the first quarter, with economists forecasting growth this year of 2.9 percent, then 3.1 percent in 2018 and 3.2 percent in 2019.
        A sharp fall in Argentina's peso from April to August has slowed, with the peso trading at 17.6 to the U.S. dollar today, down almost 10 percent this year.

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