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Argentina Raises Key Rate to 40%, in 3rd Increase This Week

Argentina Raises Key Rate to 40%, in 3rd Increase This Week


BUENOS AIRES — Argentina’s central bank shocked markets Friday morning by increasing its benchmark interest rate to 40 percent, in a bid to stabilize the country’s currency after a strong depreciation of the peso in recent days raised questions about the prospects for President Mauricio Macri’s ambitious agenda.

It was the third rate increase in a week, and came a day after the peso fell 8.5 percent against the dollar. The central bank also said on Friday that it would use “all the tools at its disposal” to slow inflation to 15 percent this year, a goal most analysts now see as unrealistic.

In parallel, Argentina’s treasury and finance ministers announced that they would aggressively cut government spending, and reduce the primary budget deficit to 2.7 percent. Their decision was seen as a response to criticism from investors that Mr. Macri’s government had not been cutting spending quickly enough.

Mr. Macri was sworn into office in December 2015 with ambitious market-friendly plans to open the economy to the world. Argentina had been closed off to international markets for more than a decade because of a longstanding legal fight with bondholders that followed its economic collapse and a default on its debt in 2002.

Follow Daniel Politi on Twitter: @dpoliti.





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