Argentine Central Bank caps credit card interest rates
Last edited Sun Feb 23, 2020, 11:20 PM - Edit history (1)
Argentine Central Bank President Miguel Ángel Pesce announced that interest rates on outstanding credit card balances would be limited by law to 55%.
Argentines, who hold a modest $8 billion in credit card debt, had been paying an average of 150% on unpaid credit card balances - and as high as 224%.
These rates had risen far above inflation- which reached 53.8% in 2019 - or wage growth, which reached 40.7%. Credit card delinquency rates have risen to 25%, the highest in 15 years.
"In an attempt to align interest rates to inflation projections, we're also lowering credit card rates," Pesce explained. "These had reached superlative levels, and had not been declining despite lower central bank rates."
Pesce, 57, was appointed by newly-elected President Alberto Fernández upon taking office on December 10. He has since lowered the central bank's reference rate from 63% to 40% amid the deepest recession in two decades.
Under Fernández's predecessor, Mauricio Macri, central bank rates ballooned from 27% in early 2018 to 63% for most of 2019 after a brief carry-trade debt bubble known locally as the "financial bicycle" burst in April 2018.
The move - and a $45 billion IMF bailout - failed to stop the collapse of the peso, which lost 68% of its value in just 18 months.
These rate hikes instead contributed to a 7% decline in GDP and a loss of 220,000 registered jobs - the equivalent of 1.6 million jobs in the U.S.
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Argentine Central Bank President Miguel Ángel Pesce and Economy Minister Martín Guzmán during a G20 meeting in Riyadh yesterday.
Pesce and Guzmán have made interest rate relief for domestic borrowers a policy centerpiece as part of a broader recovery plan enacted by the new Fernández administration.
Economic recovery is seen by both Fernández and the IMF as key to normalizing the country's $195 billion foreign debt - much of which has been in arrears since September.
