Briefly: Argentina jacked interest rates from 91% to 97% yesterday (Monday) to tame inflation and avoid a currency crash before October’s presidential elections.
It’s now going through its worst economic crisis in decades:
- 📈 Inflation is above 108%
- 📉 The peso has lost 35% of its value against the dollar this year, and
- 🐌 Its GDP is set to grow by just 0.2% this year, according to the IMF
In sum, the country’s economic Aires aren’t exactly Buenos right now. And that’s making life pretty tough for Argentina’s 46 million people.
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Intrigue’s take: Hiking interest rates by 600 basis points isn’t typically part of most re-election campaigns, but Argentina doesn’t have many options. The IMF is already disbursing a $44B bailout it previously agreed with Argentina, and China has already entered into a currency swap.
So if these new sky-high interest rates don’t cool off the country’s red-hot inflation, it’s hard to see what else will.
Also worth noting:
- The 97% interest rate in Argentina compares with 6.5% in India, 5.25% in the US, and 3.75% in Europe.
- Libertarian and outsider presidential candidate Javier Milei is leading in some polls. He’s campaigning to curtail state intervention in Argentina’s economy and replace the peso with the US dollar.