Argentina’s Central Bank Raises Benchmark Interest Rate Amidst Soaring Inflation



Key Takeaways

  • Argentina’s central bank raises the benchmark interest rate to 133% due to high inflation and worsening economic conditions.
  • Inflation data shows a monthly rate of 12.7% and an annual rate of 138%, impacting the lives of many Argentinians.

A Deepening Economic Crisis in Argentina

In a move driven by concerning economic circumstances, Argentina’s central bank has taken measures to combat skyrocketing inflation. The benchmark interest rate has been raised to 133% from the previous rate of 118%. This decision was prompted by the release of September’s inflation figures, which exceeded expectations, registering a monthly rate of 12.7% and an annual rate of 138%.


Argentina has been grappling with a deepening economic crisis, and the consequences of soaring inflation have taken a toll on its citizens. As prices continue to surge, wages and savings are eroded, leading to a significant portion of the population falling below the poverty line. Reports indicate that two out of every five people in Argentina are currently living in poverty, highlighting the urgent need for economic stabilization.

Struggles to Align with Inflation Expectations

Argentina’s central bank faces the challenge of keeping the benchmark interest rate in sync with inflation expectations. A central bank poll of analysts suggests that inflation is expected to exceed 180% by the end of the year. This disparity between interest rates and inflation has raised concerns about the effectiveness of such monetary policy measures.

Questions Surrounding the Timing

There is debate among commentators about the timing of the interest rate hike. Some argue that raising the rate at this stage may not yield the desired results due to wavering public expectations. The flight from the Argentine peso to the U.S. dollar has been a persistent issue, and many believe that the latest increase may not suffice to contain it.


A national private banking manager, speaking anonymously, expressed skepticism about the effectiveness of the latest hike. They noted, “It is no longer useful to raise the rate, expectations have gone away, and raising it at this time is not going to contain the flight from pesos to dollars.”

Currency in Free Fall and Economic Challenges

The peso’s value has experienced a rapid free fall, compounded by the government’s near-18% devaluation of the currency in mid-August. This devaluation coincided with the central bank’s prior interest rate hike, which raised the rate from 97% to 118%. As a result, the peso has weakened, surpassing the symbolic threshold of 1,000 pesos per U.S. dollar earlier this week.


The timing of these economic challenges is significant as Argentina prepares for general elections scheduled for October 22. Voters will be selecting the next president to succeed the outgoing leftist President Alberto Fernandez. Notably, radical libertarian candidate Javier Milei has emerged as a front-runner due to his remarkable first-place showing in the August primary.


Milei has advocated for substantial changes, including shutting down the central bank and dollarizing the economy to combat inflation. His recommendations to depositors to avoid renewing bank holdings in pesos underscore the gravity of the economic situation.

Rate Change Amidst Uncertainty

The central bank’s decision to alter the interest rate, initially contemplating a rate of 145%, ultimately reached the figure of 133%. This last-minute adjustment followed a reported leak and was seen as a response to the evolving economic landscape. The country continues to grapple with formidable economic challenges as it heads toward a pivotal election.