Argentina ramps interest rate to 97% as inflation soars

Argentina’s central bank hiked its base interest rate Monday by six points to 97 per cent as the government prepares to announce a spate of measures to tackle soaring inflation ahead of October’s general election.

It is the second time in less than a month that the bank has ramped up interest rates as year-on-year inflation hit almost 109 per cent in April.

In a statement the central bank said the move was aimed at creating real returns in the local currency and “preventing financial volatility from acting as a driver of inflation expectations.”

Local media claim the government will announce a raft of measures over the coming week, such as an intervention in the exchange rate, subsidies for the most vulnerable sectors and facilitating imports to bring down prices.

The measures were prepared over the weekend during a meeting headed by Economy Minister Sergio Massa aimed at finding a way to tackle Argentina’s economic woes just months out from a general election.

With center-left President Alberto Fernandez already having announced he will not stand for re-election,

Massa is one of the leading candidates to represent the ruling Frente de

Todos (Everyone’s Front) party on October 22.

“These are measures to fight inflation without stopping economic activity: a very difficult task. Everything stays the same,” Pablo Tigani, director at the Hacer consultancy, told AFP.

Latin America’s third largest economy is in turmoil. The peso lost 20 per cent of its value against the dollar in a single week in mid April.

It briefly fell to 500 to the dollar on the informal exchange rate -- about double the rate of the official one -- before stabilizing at 470.

The official rate is 238. The central bank responded by pushing up interest rates by 10 points to 91 per cent.

Inflation hit its highest level in three decades in 2022, finishing the year at 94.8 per cent. But it has kept on climbing and reached almost 109 per cent year-on-year in April.

The cost of living has risen by 31 per cent since January 1.

Last year, more than 39 per cent of the population was living in poverty.

‘Conditions deteriorating rapidly’

Fernandez and the central bank are hoping their measures will ease the massive demand for dollars.

Many Argentines see converting their pesos to US currency as their only defense against the ravages of inflation.

But the country has imposed restrictions on the purchase of foreign currencies, which has fueled the informal exchange market.