June 3, 2023

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Argentina plans to raise interest rates again, and more intervene in the currency markets as inflation rises

The Argentine government announced a package of measures to rein in soaring inflation and support the volatile peso currency on Sunday, including price adjustments, more interventions in the exchange market and urgent deals with creditors.

The economy ministry said in a statement that the measures include raising the central bank’s interest rate. The ministry did not go into details, but an official source told Reuters that the increase will be 600 basis points, bringing the rate to 97 percent.

The source added that the interest rate hike will start on Monday.

The South American country is struggling to bring down inflation, which hit 109% year-on-year in April. He also faces declining confidence in the peso and dwindling foreign currency reserves that threaten the government’s public finances.

The ministry said the central bank will increase its intervention in the foreign exchange market and double its plan to devalue the currency.

The ministry added that an agreement with the International Monetary Fund to distribute funds to the cash-strapped country will be accelerated.

The ministry stated that further measures are scheduled to be announced in the coming days.

President Alberto Fernandez’s government is seeking to take control of the economic situation as elections approach, as opinion polls show weak support for the ruling Peronist party.

Reporting by Maximilian Heath. Written by Adam Jordan

Our standards: Thomson Reuters Trust Principles.

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