Argentina cenbank chief says key rate on hold

Argentina's central bank governor Federico Sturzenegger said the country's benchmark interest rate will hold steady for now, and left open the possibility of raising it to meet the 2017 inflation target.

The central bank kept the 35-day Lebac rate at 26.25% on August 8 for an eighth consecutive weekly meeting. The inflation target range for this year is 12-17%.

"[The central bank] will persist in its restrictive position and intensify it should it be necessary to close the year at levels close to 1% monthly," ahead of next year's 10% annual inflation target, local daily El Cronista quoted Sturzenegger (pictured) as saying in a speech to the chamber of exporters.

Statistics agency Indec reported that inflation accelerated to 1.7% in July, and to 21.5% over the past 12 months. Private sector estimates pegged it at 2% and 23.5%, respectively.

The ruling coalition of President Mauricio Macri is coming off a strong showing in the midterm primaries held over the past weekend, which were seen as a referendum on the government's business-friendly reform agenda.

In fact, the coalition's candidate finished in a technical tie with former president Cristina Fernández de Kirchner in the race for senate seats representing Buenos Aires province.

Investors were anxious that a high turnout for the former Peronist leader would embolden her to run again for president in 2019, bringing back populist policies to this South American economy. While Fernández is all but assured of securing one of the province's three senate seats in the October 22 midterm election, she will most likely find herself isolated in congress, some analysts believe.

"While the Macri administration will likely increase the number of seats both in the Senate and the Lower House in October (a third of the Senate seats and half of the Lower House seats will be up for grabs), consensus with the opposition will still be needed to pass legislation," the Institute of International Finance said in a note this week.

"Nonetheless, robust public support for the current policy direction suggests that pragmatic factions of the opposition would be more willing to endorse government-sponsored initiatives. Cristina Kirchner will likely win a congressional seat in October, but it seems that she could be rather isolated."

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