Argentina's July inflation hits a 30-year high, Baidu Finance News

On Thursday, local time, Argentina’s central bank raised its key interest rate by 950 basis points to 69.5%, the eighth rate hike this year and the largest rate hike since August 2019, indicating its increasingly aggressive attitude towards soaring inflation.

 

 

In order to combat hyperinflation and ease the huge depreciation pressure on the Argentine peso, the Argentine central bank has raised interest rates every month this year, and just announced an 800 basis point hike two weeks ago.

 

 

Inflation data released on Thursday showed that Argentina's inflation rose by 71% year-on-year in July, the highest level in about 30 years; the chain increased by 7.4%, the highest in 20 years. Inflation in Argentina has been in the double digits for a long time and is expected to reach an annualized rate of 90% by the end of this year.

 

The current Argentine economy minister, Sergio Massa, is already the third since early July, as soaring prices, a sharp currency devaluation, heightened social unrest and a political crisis within the government have made the post of economy minister the country's most important job. "Hot Potato". Massa is restarting the government's fight against inflation in a more traditional way. In addition to raising interest rates, Massa has pledged not to require central banks to print money this year to fund government spending, which he called a long-term source of inflation.

 

 

But protests have erupted across Argentina over the past few months, with people unable to bear the soaring prices and demanding that the government restore various subsidies and reconsider whether to cut more subsidies.

 

Latin American economist Adriana Dupita said that since Massa was announced as the new economy minister, he has raised interest rates by 1,750 basis points, which may help reduce inflation and inflation expectations, and the scale will depend on whether Massa will deliver on his promises, That is, instead of relying on printing money to provide funds for the government, measures to reduce the fiscal deficit are taken.

 

The Argentine central bank sells dollars and buys pesos every day, and consumes an average of 60 million US dollars of foreign exchange reserves every day, so that the peso can remain basically stable in the primary foreign exchange market. However, Argentina's foreign exchange reserves are running low. According to analysis, Argentina's net foreign reserves (existing dollar assets minus debt) are about $2 billion or less.

 

 

Latin American central banks began tightening monetary conditions earlier than most of their global peers, but prices in the region continued to soar above their targets. Mexico's central bank raised its key interest rate to a record high of 8.5 percent on Thursday.

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