The recent decision by the Federal Reserve to cut its interest rates could mark a milestone in the global economy, but its impact on Argentina is overshadowed by a challenging local economic context. As the country faces a decline in GDP, a rising country risk, and increasing political uncertainty, the timing for capitalizing on this measure seems unfavorable.
Table of Contents
- What Happened in the United States?
- Consequences for Emerging Markets
- An Unfavorable Economic Context in Argentina
- Projections and New Challenges
What Happened in the United States?
On September 16, 2025, the U.S. Federal Reserve decided to reduce the interest rate by a quarter of a point, a decrease not seen in nine months. This action was viewed as an attempt to stimulate investment and employment in a context where President Donald Trump publicly pushed for this financial relief. With a background in the construction sector, Trump has consistently advocated for low interest rates, even criticizing Jerome Powell, the current Federal Reserve chair, in the past for not acting swiftly enough.
Days before the cut, Trump attempted to dismiss a member of the Monetary Policy Committee who opposed the rate reduction, accusing him of fraud in a mortgage transaction. On September 25, the Senate confirmed the appointment of Stephen Miran, an economist close to the president, to the Federal Reserve. This new member voted in favor of the rate cut, along with the rest of the committee.
With this cut, the benchmark rate in the U.S. is set between 4% and 4.25%, the lowest level in the last three years. This measure may provide relief to several economic sectors, including credit cards, small and medium-sized enterprises (SMEs) debts, mortgages, and the cost of borrowing for the U.S. Treasury.
Consequences for Emerging Markets
Historically, rate cuts in the U.S. have led to capital flows to emerging markets seeking more attractive returns. However, Argentina's current situation raises questions about its ability to benefit from these changes. With a country risk exceeding 1,000 basis points and a contracting GDP, the possibility of Argentina accessing cheaper financing in global markets in the short term is very limited.
An Unfavorable Economic Context in Argentina
The Argentine economy is currently at a crossroads. After several electoral defeats, the government faces a new political setback that further complicates the scenario for businesses and the government. Investment expectations are frustrated by the high country risk and widespread uncertainty.
Historically, Argentina has been able to benefit from rate cuts in the U.S. For instance, in 2002, the beginning of a cycle of cuts coincided with the reversal of an era of an expensive dollar, allowing the country to take advantage of an exceptional period in commodity prices following the crisis of 2001. However, the current situation is entirely different, and the conditions are not favorable for replicating such success.
With country risk above 1,000 points and GDP contracting, the likelihood of Argentina attracting investments in a global liquidity context becomes almost impossible. This is compounded by the political uncertainty affecting investor confidence.
Projections and New Challenges
Amidst this landscape, the Argentine government faces the paradox of having planned a return to external financing for 2026, precisely at a time when a continuation of the rate cuts by the U.S. is anticipated. Political and economic decisions must align to avoid missing the opportunity to access more accessible credit, a challenge that is becoming increasingly complicated.
The future of the Argentine economy will depend on several factors, including how it manages the current political uncertainty and its ability to attract investments in an increasingly competitive global environment. Expectations are cautious, and the opportunity presented by the U.S. interest rate cuts could fade if conditions do not improve quickly.
In summary, the reduction of rates in the United States, while being a sign of relief for the global economy, does not necessarily translate into an immediate benefit for Argentina. The local situation, marked by high country risk, a contracting GDP, and political uncertainty, will demand attention and clear strategies to reverse the economic course in the coming months.
For more information on the Argentine economy and its current context, I invite readers to continue exploring the analysis on my blog.
