THE message to markets could not have been clearer. On the morning of May 4th, following a run on the peso, Argentina’s central bank raised interest rates by 6.75 percentage points, its third hike in a week. The interest rate now stands at 40%, up from 27.25% on April 27th.
Across town Nicolás Dujovne, the treasury minister, told reporters that Argentina’s budget deficit, which was 3.9% in 2017, would be brought down to 2.7% this year, rather than the previously stated target of 3.2%. After the announcements the peso strengthened by nearly 5% against the dollar.
The combined measures slammed the brakes on what was looking like the start of an escalating crisis. Argentina’s peso had fallen by a fifth against the dollar since the beginning of the year, making it the worst-performing emerging-market currency. But the measures also harm the prospects of growth—and of Mauricio Macri, the president.
The problems began in January, following the central bank’s...Continue reading
from Business and finance https://www.economist.com/news/finance-economics/21741631-huge-interest-rate-hike-has-arrested-run-argentine-peso-economic-growth?fsrc=rss
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