Financial Times reports that Argentina ratcheted up interest rates by 15 percentage points to 60 per cent on Thursday as the central bank sought to arrest the plunge in the peso to a new record low.
As the country battled to reassure investors that it can address its economic vulnerabilities, the bank‘s drastic action initially offered some support for the embattled currency. But the peso — which has now lost roughly half its value this year — swiftly fell back to a fresh record low of 39.6 per dollar on Thursday — down almost 14 per cent on the day.
President Mauricio Macri on Wednesday surprised the market by asking the International Monetary Fund to speed up the release of its $50bn bailout package to shore up next year’s budget, triggering Argentina’s latest round of financial turmoil.
The central bank’s interest rate hike to the highest level of any developed country was described as a “bold policy response” by Alberto Ramos, head of Latin American economic research at Goldman Sachs. But he warned that the government would still have to ditch its policy of “ gradualism” in crimping the budget deficit and accelerate spending cuts markedly to restore confidence.
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