Argentina’s central bank unexpectedly hiked its key rate and unveiled a plan to gradually eliminate the amount of its short-term notes as the peso fell to a record low.
The bank raised the 7-day Leliq rate 500 basis points to 45 percent, according to an emailed statement. The central bank pledged to hold the rate at this level until at least October. The government canceled its daily dollar auction as well.
The decision was the fourth surprise rate hike by the central bank this year as inflation refuses to slow. The currency has plunged more than 35 percent this year, the second-worse after Turkey’s lira. The selloff in Argentine assets that began in April forced the government to turn to the International Monetary Fund for a $50 billion credit line. Still, the economy is set to enter a recession this year.
Last week, the peso fell the most since June, as Turkey’s worsening financial issues dragged emerging market currencies down. The peso fell 2.8 percent to 30.1 per dollar on the news.
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