Macro Watch: Argentina's economy, rate decision

Argentina sees positive economic signs in May

Argentina's statistics agency Indec reported annualized economic growth in May of 3.3%, driven by agriculture, industry and construction, following 15 months of retraction.

Indec also reported a 0.6% month-on-month increase in its seasonally adjusted GDP growth estimate, offering a strong indication that the nation's economy is recovering.

The agency cited a 9.3% year-on-year increase in construction in May, a 4.5% rise in retail and wholesale commerce, a 2.6% uptick in manufacturing and 3.3% growth in the agriculture sector.

However, the utilities segment shrank 4.9% and mining, which had contracted 9.7% in April, by 4.2%.

Central bank holds rate at 26.25%

Argentina's central bank left the benchmark rate unchanged at 26.25% in its bimonthly monetary policy meeting, citing the possibility of higher inflation in July than in June.

"The central bank will continue to maintain a clear anti-inflationary bias to ensure disinflation continues towards its target of inflation between 12% and 17% in 2017 and [between 8% and 12% in 2018]," the monetary authority said.

The bank said the 1.2% monthly inflation in June represented an improvement but reiterated its warning that the data should be taken with caution in light of previous upside surprises in the CPI, adding that private sector and government forecasts now see prices increasing more quickly in July.