Why Argentina’s Credit Keeps Shrinking Even as Inflation Cools
Argentina private credit fell again in real terms in July as high rates and the BCRA's peso absorption squeeze lending - the so-called absorption trap. The post Why Argentina’s Credit Keeps Shrinking Even as Inflation Cools appeared first on The Rio Times .
Despite cooling inflation, Argentina's private credit continues to decline, creating a financial "absorption trap" according to analysts. July data revealed that bank lending to the private sector fell in real terms for the second consecutive month. Bank lending to the private sector slipped 1.0% in July compared to June and 1.3% compared to the same month last year.
The central bank's efforts to control inflation are driving peso out of the system through central bank operations and the Treasury's high-yield debt sales, which leaves banks with less money to lend. High interest rates discourage borrowing, further reducing demand for loans. This vicious cycle of high rates, defaults, and tighter lending continues to keep credit stagnant even as inflation eases.
Only mortgages have shown a small increase in real terms. The central bank's Monetary Policy Report kept the policy stance unchanged, emphasizing that disinflation remains the top priority, with credit recovery expected to follow. The situation highlights the challenge of balancing inflation control with supporting economic growth.
Written by urgent.news from The Rio Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
