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Argentina raises interest rates to 69.5%, while inflation has hit a record high in 20 years

Argentina raises interest rates to 69.5%, while inflation has hit a record high in 20 years

(Reuters) – Argentina’s central bank raised its benchmark interest rate by 950 basis points on Thursday as the country struggled to curb runaway inflation, which soared to 71%, a 20-year high, according to new data.

The central bank raised the benchmark interest rate from 60% to 69.5% for 28 days, just two weeks after an 800 basis point increase and the government reshuffled its cabinet to install a new “excellent minister” in financial matters.

New inflation data released on Thursday underscores the urgency behind economic policy. Prices rose 7.4% in July, above expectations. As a result, they pushed annual inflation to a 20-year high of 71%. As the country passed Resignation Economy Minister Martin Guzman, Who has led the portfolio since the beginning of the Alberto Fernandez governmentfollowed by the resignation of her replacement, Silvina Patakis, shortly after.

(Image source: LUIS ROBAYO/AFP via Getty Images)

The numbers dashed hopes that upbeat inflation reports in the US and Brazil released this week might herald good news for the Southern Cone’s largest economy.

In Mexico, the central bank also raised the benchmark interest rate on Thursday by 0.75% to 8.5%. This is the highest level since the current bank system was implemented in 2008. Annual inflation in Mexico 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.”

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The bank added that the decision aims to return prices “to positive territory in real terms.”

The positive real rate is one of the points Argentina and the IMF agreed on in their recent negotiations over the $45 billion debt.

Interest rates in Argentina

(Image source: Tomas Cuesta/Getty Images)

Reducing inflation, which is expected to reach 90% by the end of the year, as well as Argentina’s ruinous debt and excessive spending, are part of the priorities of the senior Minister of Economic Affairs, Sergio Massa, who has also taken over powers over productive development. and agriculture.

This Thursday, Massa expressed the urgent need to announce a plan to grant tax and customs benefits to oil companies and reduce some red tape in a bid to speed up investments in the country’s Vaca Muerta shale deposits.

“Vaka Muerta is accelerating from today,” Massa said.