Argentina hikes interest rate to 60% as its currency plunges
Last edited Mon Sep 3, 2018, 06:48 PM - Edit history (1)
Amid the most serious financial crisis since the 2001 collapse, Argentina's Central Bank raised its key interest rate by 15 points today to 60% - the highest among all emerging economies.
The move came as the dollar rose 15.6% in Buenos Aires trading, following a 7.3% rise yesterday; it had reached 41 pesos earlier today before closing at 39.87.
The discount rate, which had been 27% as recently as April, has risen steadily as Argentine officials seek to stop the collapse of the peso: it's lost 53% of its value so far this year.
Some $25 billion has left the country since January, and a recession that began in April has left GDP down 6.7% just as of June.
The gradual peso erosion accelerated yesterday after President Mauricio Macri announced that he had requested an $18 billion advance from the $50 billion, 3-year credit line agreed to with the IMF on June 8.
Macri had already borrowed $15 billion from the credit line on June 22.
This was followed by an statement today by Chief of Staff Marcos Peña ratifying the current cabinet and the laissez-faire policies followed by Macri since taking office three years ago.
"We shall not abandon the path of change," he said.
Financial deregulation, critics note, was followed by $100 billion in added foreign debt under Macri, as well as a record $31 billion current account deficit last year alone.
News of this deficit led in April to the first serious run on the peso - $4.3 billion in a week.
Excluding Macri's December 17, 2015, devaluation, the peso had its sharpest one-day fall today, in percentage terms, since a 24% jump in the dollar on March 22, 2002 - at the depths of the convertibility exit crisis.
That crisis - which like the current one was preceded by a speculative bubble, doubling of foreign debt, and an IMF bailout - resulted in riots and the resignation of then-President Fernando de la Rúa.
De la Rúa, who like Macri enjoyed the support of the IMF, is himself a vocal supporter of the right-wing Macri administration.
At: https://money.cnn.com/2018/08/30/news/economy/argentina-interest-rates-currency/index.html
A billboard outside a Buenos Aires currency exchange advertises yesterday's record of 34.50 per dollar; it closed today at 39.87 pesos.
The sign held by the senior citizen below reads "Macri: Enough!"
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