Argentina Hike Interest Rates To 75%
Argentina’s central bank raised interest rates to 75% recently, in an attempt to curb its fast rising inflation rates.
The interest rate hike of a further 5.5% was the ninth increase this year and follows widespread concerns that inflation could reach 100% in the country by the turn of the year. Annual inflation in Argentina is rising faster than it has done in the past 30 years. Last month saw another 7% rise in consumer prices, which brought the annual inflation rate up to 78.5%.
Argentina has a commitment to the IMF (International Monetary Fund), as part of its permanent negotiation over its outstanding $44 billion loan deal, that it will keep interest rates above inflation. The central bank were originally making small rate increases earlier in the year, but have now had to ramp up its hikes, adding a combined 23% since July.
Many central banks throughout Latin America have had to raise interest rates this year to combat inflation, but prices have continued to stay high as the monetary policies have been less effective than in more developed economies.
According to Bloomberg’s Latin American Economist – Adriana Lupita – “The new rate hike catches up with the rise in current and expected inflation – but may not be sufficient to tame inflation or boost reserves. The substantial uncertainty on inflation and the persistent risk that the peso may soon see a sharper depreciation undermine the ability of the new rate to convince households to save or investors to have a position in pesos.”
The Envío team are watching developments with interest.