World: Argentinian interest rates hit 60 per cent as currency crashes
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The value of Argentina’s currency has plummeted by 13 per cent despite the South American country’s central bank’s effort to stabilise the currency by raising a interest rates to 60 per cent.
The peso has now fallen by more than 50 per cent against the dollar this year and the inflation rate is running at more than 30 per cent, in part due to the government raising prices on gas and electricity as it tries to repair its finances.
The bank said Thursday’s rate hike, from 45 per cent to 60 per cent - the most severe drop for the currency since it was floated in 2015 - was a “response to the foreign exchange rate situation and the risk of greater inflation”.
It had already increased interest rates four times since April, most recently on 13 August.
The rate rises were prompted by the sudden weakening of the peso in April as a drought hurt farm exports, energy prices climbed and a stronger dollar led investors to pull funds from emerging markets.
Argentina’s president, Mauricio Macri, said a lack of trust from the markets had forced him to ask for help as the peso weakens and inflation rockets.
The country has asked to borrow $50bn from the IMF to restore confidence in its finances amid high levels of government debt in dollars, which have become more expensive to pay off as the dollar strengthens.
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