Argentina hikes interest rate by 950 basis points to 69.5% as inflation hits 20-year high

A man walks by Argentina’s central bank on July 4, 2022 in Buenos Aires. Prices rose 7.4% in July, pushing annual inflation to a 20-year high of 71%.

Tomas Cuesta | Getty Images News | Getty Images

Argentina’s central bank raised its benchmark interest rate by 950 basis points on Thursday as the country struggles to keep a lid on inflation, which has risen to a 20-year high of 71%, according to new data.

The central bank raised the benchmark “lelic” rate for a 28-day period to 69.5% from 60%, a rate the bank had set two weeks ago when it raised the rate by 800 basis points and the government reshuffled the cabinet. New Economy “Superminister.”

New inflation data on Thursday underscored an urgent stimulus for monetary policy: Prices rose 7.4% in July, beating expectations and pushing annual inflation to a 20-year high of 71%. This month, President Alberto Fernández resigned and was replaced as longtime finance minister.

This week’s optimistic inflation reports from the United States and Brazil could be good news for the Southern Cone’s largest economy, as prices fell by a record 0.68% in July.

In Mexico, the central bank on Thursday raised the country’s benchmark interest rate by three quarters of a percentage point to 8.5%, the highest level since the bank’s current regime took effect in 2008. Mexico’s annual inflation rose to 8.15% last month. , a level not seen since December 2000.

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Argentina’s central bank said in a statement that its decision “will help reduce inflation expectations for the rest of the year and consolidate monetary and exchange stability.”

The bank also said the move was aimed at bringing rates closer to “positive territory in real terms”.

A positive real interest rate was agreed upon in the recent $45 billion loan agreement between Argentina and the International Monetary Fund (IMF).

Reducing inflation, which is forecast to reach 90% by the end of the year, as well as Argentina’s crippling debt and chronic overspending, are at the top of the agenda for the country’s newest finance minister, Sergio Massa, who has also taken power. Manufacturing and Agriculture.

Massa expressed urgency on Thursday as he announced plans to offer tax and customs benefits to oil companies and cut some red tape in efforts to turbocharge investment in the country’s Vaca Muerta shale formation.

“Vaca Muerta is accelerating as of today,” Massa said.

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