stockmarketwalk The president of Central Bank of Argentina Miguel Pesce and Economy Minister Sergio Massa met with IMF Director Kristalina Georgieva this week and reaffirmed their commitment to implement the terms of the $44 billion IMF package.
Following the meeting, one of the conditions is that inflation rate must be lower than the level of interest rate.
According to Bloomberg economist Adriana Dupita, the new interest rate is going to be able to catch up with the current and expected level of inflation, but it may not be enough to curb inflation or accumulate reserves.
The significant inflation uncertainties and the ongoing risk that the peso could soon depreciate further, are undermining the new interest rate’s ability to persuade households and investors to save and build investment positions in peso.
According to forecasts, inflation may rise to 95 percent by the end of this year. South American central banks have raised interest rates one by one in a row this year to combat high inflation. But prices have typically remained high, among others because a large number of workers and businesses only use cash, making the monetary intermediations less effective.
Argentina’s central bank has been gradually raising interest rates since the beginning of this year and has been accelerating rate hikes over the past three months, raising a total of 23 percentage points since July.
