The financial institution of Argentina Republic on Thursday hiked the benchmark charge per unit, Leliq, by 5.5% so as to contain increasing inflation within the country. Following the rate of interest hike by the financial institution, the rate in Argentina currently stands at 75%.
A hike in rate of interest is an element of the measures implemented by the financial organisation to regulate the rate of inflation within the country which is nearing 100%. this can be the ninth time that the financial institution has raised the Leliq rate this year.
According to statistics from August 2022, the annual rate within the Latin American country is standing at 79%. The inflation within the country is increasing at its fastest pace within the last 30 years.
COVID-19 Pandemic and resultant lockdown had pushed Argentina into a lengthy recession period. The Argentinian economy suffered huge losses because the global supply chain crisis and slow economic activity impacted the domestic economy.
The economy of Argentina recovered from a long-standing recession with strong GDP growth because the economy grew by 11.9% during the third quarter of the previous twelvemonth.
The South American country then struck a handle the International Momentary Fund during which the worldwide financial organization will lend Argentina a loan of 44 billion US dollars. one amongst the main elements within the financial pander to the IMF is that the financial organization of Argentina will keep its benchmark rate of interest above the speed of inflation within the economy.
Even though the interest rates are currently below the extent of the rate, financial institution President Miguel Pesce and Economic Minister Sergio Massa promised during a meeting with IMF representatives that the Latin American country is committed to implementing all points noted within the 44 billion deal. The meeting was conducted some days ago with the decision maker of the International fund, Kristalina Georgieva.
Adriana Dupita, an economist based in Latin America told news agencies that the recent charge per unit hikes by the financial organization of Argentina may not be sufficient to manage high inflation rates.
Interest rate hikes fail to deliver the required results the bulk of the time intrinsically monetary policy measures have less impact on resident economies. The high number of all cash workers and businesses which rely only on cash makes it hard for such monetary measures to create any reasonably significant impact.
Along with Argentina, central banks in various other Latin American countries have also resorted to hiking interest rates within the past few months.