- As the nation fights to control surging inflation, which hit a 20-year high of 71% on Thursday, the central bank of Argentina increased its benchmark interest rate by 950 basis points.
- The central bank increased the benchmark rate for the 28-day term from 60% to 69.5%.
- On Thursday, fresh inflation figures highlighted the urgency guiding economic policy: Over estimates, prices increased 7.4% in July, bringing annual inflation to a 20-year high of 71%.
As the nation fights to control surging inflation, which hit a 20-year high of 71% on Thursday, the central bank of Argentina increased its benchmark interest rate by 950 basis points.
The central bank increased the benchmark rate for the 28-day term from 60% to 69.5%. This rate was established just two weeks prior when the bank increased the rate by 800 basis points and the government reorganized its cabinet to install a new economy “superminister.”
On Thursday, fresh inflation figures highlighted the urgency guiding economic policy: Over estimates, prices increased 7.4% in July, bringing annual inflation to a 20-year high of 71%. The longstanding finance minister for President Alberto Fernandez resigned last month, and his replacement was fired shortly after.
The figures dispelled optimism that this week’s upbeat inflation readings in the US and Brazil may herald good news for the largest economy in the Southern Cone.
The benchmark interest rate in Mexico was increased by the central bank on Thursday by three-quarters of a percentage point to 8.5%, the highest level since the bank’s current policy was implemented in 2008. Last month, Mexico’s annual inflation rate increased to 8.15%, the highest it had been since December 2000.
The decision “will assist lower inflation expectations for the remainder of the year and consolidate financial and exchange stability,” according to a statement from Argentina’s central bank.
Additionally, the bank stated that the move is intended to get rates “closer to a positive terrain in real terms.”
One of the terms of the recent $45 billion debt agreement between Argentina and the International Monetary Fund (IMF) is a positive real interest rate.
The major priorities for Argentina’s newest economics minister, Sergio Massa, who also has authority over manufacturing and agriculture, are lowering inflation, which is expected to reach 90% by the end of the year, as well as Argentina’s catastrophic debt and persistent overspending.
When Massa announced a plan on Thursday to remove some red tape, grant oil companies tax and customs incentives, and increase investment in the nation’s Vaca Muerta, he conveyed a sense of urgency.
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