Argentina hikes interest rate again as inflation hits 20-year high

Buenos Aires, Aug. 12 (BNA): Argentina’s central bank raised its benchmark interest rate by 950 basis points on Thursday as the country struggles to control soaring inflation that has risen to a 20-year high of 71%, a new newspaper reported. data.

The central bank raised the benchmark 28-day “Liliq” interest rate to 69.5% from 60%, a rate the bank set just two weeks ago when it raised the interest rate by 800 basis points and the government reshuffled the cabinet to stabilize the new “superminister” economy.

New inflation data released Thursday underlined the urgency of driving economic policy: Prices rose 7.4% in July, above expectations and pushing annual inflation to a 20-year high of 71%. Reuters reported that the month saw the resignation of President Alberto Fernandez’s longtime finance minister, which was followed by the dismissal of his replacement.

The numbers dashed hopes that upbeat inflation reports this week in the US and Brazil, where prices fell 0.68% in July, might herald good news for the Southern Cone’s largest economy.

In Mexico, the central bank on Thursday also 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 system was put in place in 2008. Mexico’s annual inflation rate rose last month to 8.15%, a level not seen Since December 2000.

Argentina’s central bank said in a statement that its decision “will help reduce inflation expectations for the remainder of the year and enhance financial and exchange rate stability.”

The bank also said the decision aims to bring interest rates closer to “positive terrain in real terms”.

The positive real interest rate is one of the points agreed between Argentina and the IMF in a recent $45 billion debt deal.

Reducing inflation, which is expected to reach 90% by the end of the year, as well as Argentina’s crippling debt and chronic excessive spending, are high on the agenda of the country’s latest economy minister, Sergio Massa, who has also taken over manufacturing and agricultural powers.

On Thursday, Massa expressed the need for urgency when announcing a plan to give tax and customs benefits to oil companies and cut some red tape in a bid to ramp up investments in the country’s Vaca Muerta shale.

“Vaka Muerta is at a fast pace from today,” Massa said.

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