Argentina’s central bank raises rates as peso weakens

Argentina’s central bank raises rates as peso weakens

Argentina’s central bank raised the benchmark overnight interest rate to 45 per cent Monday after the peso tumbled to a record low as a corruption scandal unnerved investors and emerging markets took a beating from Turkey’s currency crisis.

The bank raised the rate 5 percentage points to reduce the risk of a surge in inflation, adding in a brief statement it would keep the rate at this level until at least October.

The increase comes after the peso tumbled to a record low of 30.70 per dollar on Monday, as investors turned to dollars as a safer investment on concerns over a currency sell-off in emerging markets and the impact of a swelling bribery scandal in Argentina.

The monetary authority is trying to encourage people to hold on to pesos, helping to contain inflation. According to the latest estimate by economists surveyed by the central bank, consumer prices could rise 32 per cent this year, up from a 25 per cent pace in 2017.

That threatens to push the economy into a longer-than-expected recession this year, putting at risk the efforts of the country’s market-friendly president, Mauricio Macri, to win a second term next year.

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