Argentina raises interest rates to nearly 100%

Argentina's central bank has raised its benchmark interest rate to 97% to combat inflation that has hit a 30-year high.

Central banks around the world are struggling to contain inflation. In Argentina, the problem is even more serious, with inflation in the country surpassing 100% - the highest since the early 1990s. Argentina now has the third highest inflation rate in the world , behind only Venezuela and Zimbabwe, according to the International Monetary Fund (IMF).

As a result, the Central Bank of Argentina raised its benchmark interest rate by 6% on May 15. In its announcement, the agency said it hoped the rate hike would spur investment in the country's peso. Hyperinflation is forcing investment out, causing the peso to lose 23% of its value against the dollar this year.

Ahead of the presidential election in October, Argentina's Economy Minister Sergio Massa is focused on preventing further depreciation of the currency and cooling inflation. He was seen as a potential candidate after President Alberto Fernandez announced last month that he would not seek re-election. Massa's success will be tied to the results of his plan to curb inflation.

Massa has been raising interest rates repeatedly recently. He has also pledged not to ask the central bank to print more money to finance public spending this year. This has been the source of persistent inflation in Argentina for the past two years.

However, analysts say yesterday's rate hike is unlikely to bring any change to Argentina. "We have the feeling that the government has completely lost control of inflation," said Miguel Kiguel, former head of Argentina's Central Bank.

"I think the government acted too late. Of course, raising interest rates is the main strategy to deal with inflation. But this takes time. When the central bank raises interest rates, the impact will be visible after 2-3 months. This time is not effective for the current situation in Argentina," he concluded.

Ha Thu (according to CNN)

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