BCRA Lowers Reference Interest Rate for Third Time Since Milei’s Inauguration, Offers Flexibility to SMEs

The Central Bank of Argentina (BCRA) has announced a third adjustment to its reference interest rate since President Javier Milei took office in December 2021. The rate has been lowered from 80% to 70%, marking a noticeable decrease in the rate of increase despite a strong statistical drag on inflation.

The BCRA cited the importance of underlying inflation measurements in the coming months, especially considering upcoming adjustments to regulated tariffs for public services. In response to the evolving economic situation and liquidity conditions, the BCRA has made access to the free exchange market more flexible for micro, small, and medium-sized companies.

In addition to the interest rate adjustment, these companies can now pay for their imports within 30 days and receive advances of up to 20% on capital goods. These measures aim to support businesses during a period of strong exchange rate restrictions. The BCRA’s decision comes amid ongoing efforts to stabilize and support the Argentine economy as it faces various challenges.

This is not the first time that the BCRA has lowered its reference interest rate since President Milei took office in December last year when it was at 133%. Each time, it cited “slowdown” in inflation as the reason for their decision. Despite this, there have been noticeable decreases in inflation rates over time.

The BCRA’s move is significant as it allows micro, small, and medium-sized companies more flexibility in accessing foreign currency through the free exchange market. This flexibility will be particularly useful given ongoing trade restrictions that have limited these companies’ ability to import goods needed for their operations.

Overall, this is an important step by the BCRA to support businesses during this challenging economic climate while also taking steps towards stabilizing inflation rates over time.