Faced with record-breaking inflation in April, Argentina’s economy ministry announced a series of measures this morning which include raising the Central Bank’s benchmark interest rate by 600 basis points today.

It’s a direct response to new inflation figures published by the National Institute for Statistics and Census (INDEC) on Friday — prices rose by 8.4% in April, reaching 108.8% interannually. 

The yearly nominal rate for 28-day Liquidity Bills —the rate at which the Central Bank lends money to financial entities— is now 97%. The monthly effective interest rate is 8% — under April’s inflation rate — and 154% annually.

Interest rate hikes have to be approved by the board of the Central Bank, so an announcement from the financial entity is expected tomorrow to confirm the measure. According to Central Bank sources, the crawling peg will be maintained at the same level as the inflation rate — the aim being to keep the peso competitive against the US dollar.

The last time the Central Bank raised interest rates was on April 27, when it did so by 1000 basis points following a run against the peso.

Friday’s inflation rates surpassed all prior predictions by consulting firms, prompting the economy ministry to respond with a series of working meetings over the course of yesterday. 

“This will require a redoubling of efforts from the macroeconomy in order to implement policies to improve fiscal accounts, the accumulation of reserves and exchange rate stability, as well as to strengthen our income policy,” said Economy Vice Minister Gabriel Rubinstein in a press release on Friday. 

Other measures

Yesterday’s meetings also resulted in a packet of measures that the economy ministry announced via a series of press releases. The ministry is set to:

• Create a new “Tracking, Tracing and Trade Promotion Unit” comprised of several financial and regulatory institutions (including the Central Bank and Customs) that will “monitor the buying and selling of goods and services in both domestic and international trade”
• Establish the Central Market as a direct importer of food in order to “reduce the effective price of fresh and non-perishable products for the public”
• Reduce import taxes to allow a higher influx of industrial products in what the ministry calls a “suspension of antidumping rights”
• Enact tax relief measures for small and medium-sized businesses with outstanding debt
• Lower the costs of financing the Ahora 12 program — which allows consumers to pay in 12 low-interest monthly installments — by 9% for businesses