Argentina’s Central Bank raised its benchmark rate Tuesday for the third time this year as inflation continues to speed up.
Officials increased the key, 28-day Leliq rate by 200 basis points to 44.5 percent, according to a statement. The announcement comes after President Alberto Fernández declared a “war on inflation” last week, adding days later that the government will take “all necessary measures” to combat price increases.
Government data last week showed consumer prices in February rose 4.7 percent from January, the fastest monthly pace in nearly a year and the third straight month of higher inflation.
Raising borrowing costs above Argentina’s 52 percent annual inflation rate is a pillar of the monetary policy the government agreed upon in its pending programme with the International Monetary Fund. Tuesday’s rate increase boosts the effective annual rate, which accounts for compounded interest, to 53.3 percent.
Policy makers at the Central Bank consider that the effective annual rate is the one that needs to exceed inflation to comply with the IMF’s goal of positive rates.
After not raising borrowing costs for a year despite high inflation, the government’s IMF agreement has made the Central Bank shift its inflation strategy. Along with raising rates, the monetary authority has committed to printing less money this year to finance government spending.
by Patrick Gillespie, Bloomberg