Argentina’s central bank dramatically raised its benchmark interest rate by 1,000 basis points on Thursday as a renewed peso selloff in parallel markets piles more pressure on the country’s economic crisis, according to two people with direct knowledge of the decision.
(Bloomberg) — Argentina’s central bank dramatically raised its benchmark interest rate by 1,000 basis points on Thursday as a renewed peso selloff in parallel markets piles more pressure on the country’s economic crisis, according to two people with direct knowledge of the decision.
The central bank’s board boosted its key Leliq rate to 91% from 81%, according to the people, who asked not to be named before the decision is made official by the monetary authority. The Argentine Economy Ministry first announced the rate increase intention in a statement sent by message. The central bank’s press office declined to comment.
It’s the biggest rate hike in the three years and a half years of President Alberto Fernandez’s administration. The central bank, which typically decides on its rate levels on Thursdays and doesn’t have a precise time to release a statement, isn’t independent and is headed by a Fernandez ally.
Read More: Argentina Central Bank Lifts Rate to 81% as Inflation Jumps
The move by the bank known as BCRA is also the second rate increase in as many weeks as the government works to stop a sharp decline in the country’s currency in parallel markets with annual inflation running at over 100%. That backdrop is challenging policymakers’ efforts to avoid a sharp devaluation on the official exchange rate, which is managed by currency controls.
The parallel rate, known by its Spanish acronym CCL, strengthened 2.2% to 460 pesos per dollar Thursday after Reuters first reported on the possible rate hike. Still, the currency lost 13% last week.
Lifting rates comes on top of other recent emergency measures, such as the central bank tapping a swap line from China to finance imports or intervening in financial markets even as the International Monetary Fund warns against such a strategy.
Earlier this week, Economy Minister Sergio Massa vowed to use “all the tools of the state to stabilize this situation” and halt the collapse in the nation’s parallel exchange rates.
Read More: Argentina’s Massa Vows to Use All Tools to Stop Peso Slide
(Updates recasting lead. A previous version corrected the spelling of the IMF in last paragraph.)
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