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Rate Cuts Revive February Inflation Spike Fears in Argentina

  • Pesce says inflation risks are medium-term, not immediate
  • Low peso demand in Feb., rate cuts boosted inflation recently
Photographer: Erica Canepa/Bloomberg

Argentina’s central bank has slashed interest rates the most in the world in recent weeks, reviving concerns about an oft-repeated monetary policy misstep that triggers faster inflation in the country near the start of the year.

Economists are warning of the so-called “February trap,” when prices accelerate amid elevated cash in circulation due to Christmas holiday spending, given that the policy rate was reduced 13 percentage points in just over a month.