WASHINGTON, March 17, 2014 (AFP) – Moody’s lowered its credit rating for Argentina by one step Monday, citing a sharp fall in the country’s reserves and inconsistent economic policies. The fresh blow to the country came as Buenos Aires reported that prices rose 3.4 percent in February over January, taking the annual inflation pace to more than 40 percent.
Moody’s cut the rating to Caa1 from B3, putting it in the mid-range of “speculative” or junk bonds.
The agency also cut its outlook for Argentina to negative from stable — a warning that the South American country could face another downgrade.
Moody’s said a sharp fall in the government’s foreign exchange reserves, to $27.5 billion from $52.7 billion in 2011, increases the risk that Buenos Aires “may not meet its foreign-currency debt service obligations.”
It added that “an inconsistent policy environment” increases the likelihood that reserves will remain under pressure through 2015.
It said the country faces persistent capital flight and declining trade surpluses, which will further erode reserves, which the government must use to pay its bond holders.
In addition, confidence in the currency is fallin