Argentina hikes interest rates to 69.5% as inflation hits 20-year high

Friday, August 12th 2022, 5:24 AM EDT

By Reuters

Argentina's central bank raised its benchmark interest rate by 950 basis points on Thursday as the country struggles to keep a lid on spiraling inflation that rose to a 20-year high of 71%, according to new data.

The central bank raised the benchmark rate for the 28-day term to 69.5% from 60%, a rate the bank set just two weeks ago when it hiked the rate by 800 basis points and the government shuffled its cabinet to install a new economy "superminister."

New inflation data on Thursday underscored the urgency driving economic policy: Prices rose 7.4% in July, above expectations and pushing annual inflation to a 20-year high of 71%. The month saw the resignation of President Alberto Fernandez's longtime finance minister followed by the ouster of his replacement.

The numbers dashed hopes that this week's optimistic inflation reports in the United States and Brazil might portend good news for the Southern Cone's largest economy.

In Mexico, the central bank on Thursday also raised the country's benchmark interest rate three-quarters of a percentage point to 8.5%, its highest level since the bank's current regime was put in place in 2008. Mexico's annual inflation climbed last month to 8.15%, a level not seen since December 2000.

Argentina's central bank in a statement said that its decision "will help reduce inflation expectations for the remainder of the year and consolidate financial and exchange stability."

The bank also said the decision aims to bring rates closer "to a positive terrain in real terms."

A positive real interest rate is one of the points agreed between Argentina and the International Monetary Fund (IMF) in a recent $45 billion debt deal.

Reducing inflation, which is predicted to hit 90% by the end of the year, as well as Argentina's crippling debt and chronic overspending, are at the top of the agenda for the country's latest economy minister, Sergio Massa, who has also assumed powers over manufacturing and agriculture.

Massa on Thursday conveyed urgency when announcing a plan to give tax and customs benefits to oil companies and to cut some red tape in an effort to turbocharge investments in the country's Vaca Muerta shale formation.

"Vaca Muerta is getting fast-tracked from today," said Massa

Hopefully we can learn from our neighbors from the south. Some of those countries had hyperinflation that is shocking

I visited a family in Brazil, the grandfather was a college professor. He had put away a good amount of funds for his retirement.Thought he was all set for retiring, He said because of inflation, his savings could barely buy a month of groceries. Lucky for him, he was still working so they were paying him his weekly salary adjusted for the inflation. The amount of that weekly pay could buy a new Volkswagen beetle (still sold down there)

But he had no retirement funds and felt he could not stop working.

As you point out, it can happen elsewhere,..and some terrible examples historically, the hyperinflation of

Venezuela

One of the ongoing entries on this list, hyperinflation began across Venezuela in the mid-2010s and went on for several years, reaching 1,698,488% in 2018. It got so bad that, as of 2018, the government decided to stop reporting official inflation numbers as many stores even stopped listing prices of products due to how quickly the cost of everything was changing.

Maybe the worst was Germany

Following the value of money in circulation after the First World War, the German Reichsbank began printing unlimited amounts of notes, causing rapid hyperinflation that shocked many other nations. By 1923, 100,000,000,000,000 mark notes were being printed and soon a one trillion to one exchange was issued in an attempt to re-stabilize the economy.

It was said that it would take a wheelbarrow of marks to by a half loaf of bread.

BTW, have you noticed how often we are spending trillions of dollars these days? a billion dollar bills end to end would go around the earth 3 and a half times. a trillion, would go 8 million miles ,...past the sun.... About 98 million miles.

We don't have nearly enough paper for that,..

So we just "print" that via bank notes,..

The more created, the less YOUR money is worth.

Maybe their government is a little more truthful then ours?

Yeah I have to laugh. "Zero percent inflation in July" Ummm no it was officially 8.5%. No need to take a victory lap on that one. Truth be told it's probably three times that number at least.

They reinforced this lie at an SBA webinar I recently attended on the "Inflation Reduction (Expansion) Act"

Of course they took NO questions from the attendees and abruptly ended the meeting in 30 minutes after the last DNC cheerleader "ummed" and "ya knowed" her way through her talk.

One of the ghastly low lights was a $4K tax credit on a USED EV! bwahahaha. Then the battery goes dead costing you $7500 for a new one conservatively.