Local media including the Buenos Aires Times reported on the 16th (local time) that Argentina’s central bank, which is struggling with chronically high inflation, took an austerity measure by raising the base interest rate.
The Central Bank of Argentina raised its key interest rate by 3 percentage points to 78% this afternoon. This was to curb deepening inflation, with consumer prices rising 102.5% year on year in February and 6.6% month on month. This is the first time in 31 years since September 1991, when hyperinflation hit Central and South America, that Argentina’s inflation rate has recorded three digits.
The Argentine authorities also explained that they inevitably raise the benchmark interest rate to include the unrestricted inflation recently and comply with the agreement with the International Monetary Fund (IMF). Earlier, Argentina reached an agreement with the International Monetary Fund (IMF) to restructure debt worth $44 billion (about 58 trillion won) last year. At that time, the IMF insisted that the annual effective interest rate (EAR) be kept higher than the rate of increase in consumer prices compared to the same month in the previous year in the agreement. The rate increase brought Argentina’s YAG to 113.2%.
Initially, experts expected Argentina’s central bank to raise the key interest rate by at least 5 percentage points, local media reported. However, with the forecast that the inflation rate in March will approach 7% compared to the previous month, additional increases cannot be ruled out.
Ahead of the presidential election on October 22, the Argentine government is trying to contain prices by freezing the prices of major daily necessities and introducing a new maximum denomination of 2,000 pesos. However, the foreign media said that voices criticizing the regime are growing in the political world and civil society, stating that it is insufficient. Ambito, a local media outlet, quoted an economist and said, “The inflation rate is expected to reach 90-100% this year.”
