Argentina's central bank is likely to hike the benchmark interest rate between 150 and 350 basis points in April, analysts and traders said, after the country finalized a $44 billion debt program with the International Monetary Fund.

The South American country has pledged as part of the IMF deal to shift toward positive real interest rates above annual inflation now at over 52% and forecast to hit as high as 60% this year as the war in Ukraine heats global commodities prices.

Argentina's current interest rate is 44.5%, equivalent to some 54.9% on an effective annualized basis. Seven analysts and traders surveyed by Reuters forecast a rise to between 46% and 48% in April, effectively 57.1% to 60.1% on an annualized basis.

The median forecast from the analysts and traders Reuters spoke to was for the rate to rise to 46.5% in April. The average response was 47%.

Reuters this month, citing a central bank source, reported that it would raise rates again next month if March inflation was around 5%. The bank has increased the rate three times in 2022 after holding it steady for over a year.

The IMF "understands the rise in rates as an anti-inflationary policy, while the BCRA (central bank) understands positive returns as a reward for staying in pesos and discouraging dollarization," a bank source said.

A central bank spokesperson did not respond to requests for comment on plans for interest rate hikes in April.

Bringing down inflation and bolstering confidence in the local peso currency is key for the major grains exporter to right its embattled economy and build up foreign currency reserves it needs to avoid further defaults down the road.

Analysts said that recent hikes had pushed the benchmark interest rate toward positive real territory, though cautioned that with prices spiraling, the rate may still be too low.

"The renovated pressure stemming from higher commodity prices following the invasion of Ukraine are to drive headline inflation higher, what is not yet incorporated into the BCRA survey," J.P. Morgan said in a note.

"When deflating by our own forecast, the ex-ante real policy rate continues to print into negative territory."


Argentina: rates vs inflation

Argentina: rates vs inflation (Interactive version)