Argentina Hikes Interest Rates to Nearly 70% Amid Runaway Inflation
August 12, 2022
When the Federal Reserve raised interest rates by 75 basis points, it was considered to be an aggressive maneuver, but it pales in comparison to what Argentina’s central bank has been doing. The nation raised its benchmark interest rate by 950 basis points this week as it struggles to contain rampant inflation.
The central bank raised the benchmark rate to 69.5% from 60%, a rate that the bank had set just two weeks earlier when it hiked the rate by 800 basis points following the appointment of a new Finance Minister, the third since early July.
Recent inflation data underscores just how urgent the government’s fight against inflation is. On a monthly basis, prices climbed 7.4% in July, higher than economists had forecast. That brings the annual inflation rate to a staggering 71%. The number dashed hopes that promising inflation readings from the United States and Brazil would portend good news for Argentina, South America’s second-largest economy.
Argentina’s central bank said the decision aims to bring rates closer “to a positive terrain in real terms.” A positive real interest rate is a key pillar in a recent $45 billion debt deal between Argentina and the International Monetary Fund.
Economists expect the central bank may have further yet to go in its fight against inflation, which is expected to hit 90% by the end of the year.