Argentina's Inflation Up To 71%, Central Bank Raises Interest Rates: What's Next?

Argentina’s central bank raised its benchmark interest rate by 950 basis points on Thursday, CNN Business reported. The hike comes as the country struggles to reduce inflation which is now experiencing a 20-year high of 71%.

What Happened: A new report on Thursday revealed that prices rose 7.4% in July which was above estimates and pushed inflation to its new 20-year high. The report underscored the urgency driving economic policy in Argentina. In July, President Alberto Fernandez’s longtime finance minister resigned which was followed by the removal of his replacement.

Before Thursday’s hike, Argentina’s benchmark interest rate for the 28-day term was 60% and it now is 69.5%. The 60% rate was set just two weeks ago after it was hiked by 800 basis points amid a cabinet shuffle in order to install a new economy “superminister.”

Read Also: New Change In Argentina's Government With Sergio Massa Taking Over Economy, Agriculture And Productive Development Ministries

The nation’s central bank shared in a statement that its decision “will help reduce inflation expectations for the remainder of the year and consolidate financial and exchange stability.” The bank also shared that the hike’s main goal is to bring rates closer “to a positive terrain in real terms.”

Reaching a positive real interest rate is one of the points agreed on between Argentina and the International Monetary Fund in a $45 billion debt deal.

Argentina’s latest economy minister Sergio Massa has entered office with many issues to resolve such as reducing inflation, which is now expected to hit 90% by the end of the year. Massa also has to deal with the nation’s crippling debt and chronic overspending.

On Thursday, Massa conveyed a sense of urgency when announcing a plan to give tax and customs benefits to oil companies in an effort to speed up investments in the country’s Vaca Muerta shale formation. Massa shared, “Vaca Muerta is getting fast-tracked from today.”

Photo: Courtesy of Angelica Reyes on Unsplash