Banco Central de la República Argentina on Aug. 7 said it shifted its benchmark rate and created a new committee to make future rate decisions as it held the monetary policy rate at 40%.
The new benchmark rate is now tied to the seven-day Leliq central bank notes, which are exclusively for the country's banks, instead of Lebac. In a statement, the regulator said the move meant that monetary policy decisions would "focus on an instrument whose operational influence was on the rise" as the central bank gradually reduces the stock of the Lebac instrument.
Separately, the central bank also announced that it had created a new, four-person monetary policy committee to determine the central bank's reference rate, among other decisions. The committee will consist of the central bank's president, vice president and one board-selected director, along with the deputy head of economic investigations.
The new committee will meet on the second Tuesday of each month to set the policy rate.
In holding the benchmark rate at 40%, the central bank noted that inflation accelerated more than expected in June, reaching 29.5%, which was mainly due to the fall in the Argentine peso in May and June.
High frequency indicators already showed deceleration of inflation in July, the regulator noted, albeit milder than expected.
The baseline scenario of the central bank projections "indicates that core inflation for the months of August, September and October will be below the July records," though it admitted that a longer period of financial stability would be needed to reduce risks of a greater-than-expected transfer of the exchange rate to retail prices.
The central bank said it expected a normalization and a gradual recovery in agricultural production and financial market activity, that could take a "few months."
"Consequently, it is estimated that in 2018 the economy will remain at levels similar to the previous year, and then resume its growth in 2019," the central bank said.
In addition, the statement noted a primary deficit of 0.9% of GDP in the first half, down from 1.4% in the same period in 2017.
The central bank said its monetary policy committee was determined to "continue monitoring the behavior of inflation in the coming months, determined to introduce corrective actions, if necessary, to achieve its goals."