Argentina plans defenses to battle skyrocketing inflation
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The Argentinian government has announced a set of new measures that will solve the skyrocketing inflation levels that have plagued the country. These measures are also aimed at supporting the value of the Argentinian peso, whose value has plummeted because of the persisting inflation.
Argentina plans additional interest rate hikes
The Argentinian central bank has announced a set of measures aimed at taming inflation. These measures include an interest rate hike. The economy ministry has not provided in-depth details about the rate hikes. However, an official has said that the hike will be 600 basis points, and it will bring the rate to 97%.
The fresh interest rate hike will be implemented on Monday. The country is also battling with high inflation, which increased by 109% on an annual basis in April. The high inflation has also hampered confidence in the Argentinian peso, with the plunging foreign currency reserves also threatening the government’s finances.
The Argentinian central bank is also planning to intervene more in the foreign exchange market while doubling down on the currency devaluation plan. The bank held a meeting with the International Monetary Fund to release funds to the country that has to deal with low cash reserves.
The ministry said that it will be announcing a new set of measures in the coming days. The Argentinian government led by President Alberto Fernandez is looking to control the current economic situation as the elections near. The opinion polls also show support for the ruling Peronist party.
Skyrocketing inflation levels in Argentina
The inflation rate in Argentina has increased significantly despite the price controls that have been put in place. The Argentinian central bank has hiked interest rates severally, but this has done little to deal with inflation. There are concerns that the country could go back to the hyperinflation that hit the country more than 30 years ago.
The dollar reserves have also declined significantly, with the reserves being affected negatively by the historic drought that has affected the main cash crops in the country, even as the central bank spends hard currency to support the value of the peso. The peso plunged to a record low across parallel markets last month.
The Argentinian government is currently in a dilemma involving how to tame the high inflation levels while avoiding a crash of the currency. The bank is also looking to protect the foreign reserves at the bank that have plummeted significantly in recent years. Some analysts have estimated that the government has negative net reserves.
The markets are currently watching the political developments in Argentina more closely. The country will be headed for the general elections in October, which might further affect the inflation level and the valuation of the peso. The International Monetary Fund (IMF) is also looking to secure a $44 billion loan deal while speeding up payouts.
Investors are closely paying attention to talks with the IMF since the country secured fresh funding. Therefore, it is crucial to lower the exchange and financial tensions at the current stage.
