The Central Bank of the Argentine Republic devalued the peso by 22% on Monday when currency markets opened, bringing the official dollar exchange rate to AR$350. It committed to maintaining the rate until October. 

It also increased the interest rate by 21 percentage points in an attempt to encourage local investors to maintain their pesos, instead of fleeing to the dollar.

Following this decision by the Central Bank, the nominal annual monetary policy rate rose from 97% to 118%, which increases effective annual rates to 209%. 

In a press statement, the Central Bank said that the objective of its decision was to “anchor exchange rate expectations and minimize the extent of transfer to prices, to tend towards real positive returns on investments in local currency, and favor international reserve accumulation.”

Under pressure after Javier Milei’s victory in Sunday’s primary elections, the government was seeking to calm the generalized nervousness provoked by a collapse of over 10% in Argentine bonds and shares in pre-market trading. 

A senior official source told the Buenos Aires Herald that the decision to devalue is a “faculty” of the national administration, rejecting the idea that it was a direct request from the International Monetary Fund.

This devaluation of the official exchange rate follows the fiscal devaluation carried out weeks ago via the imposition of special aliquots of 7.5% for goods and 25% for services. According to senior official sources, the government is analyzing reconsidering the measure for some specific cases.

Reports by the Argentine market’s most respected consultancies said that Milei’s victory in the primaries was a “black swan” and warned of the impact the result could have, especially on the exchange rate.