Per Reuters
Argentina has decided to raise its rate hike by 600 basis points, increasing the rate by 97%. This came as the country's economic defences hit 109% in April as it tried to battle runaway inflation.
JPMorgan gave a statement regarding what Argentina was doing.
"The Casa Rosada (presidential palace) is concentrating for now on seeking resources to contain the bleeding of reserves and alleviate the impact of the rise in prices,"
Argentina's inflation hike is spiking fears that the company could go back to hyperinflation, which happened over 30 years ago. Fundcorp portfolio manager Robert Gerette gave a statement regarding the situation, sharing what he thought the central bank was doing.
"If the BCRA (central bank) speeds up a devaluation, it will be adding more gasoline to the fire. If it delays the exchange rate to use it as an anchor, it will sell more and more reserves cheap"
In mid-March, it was reported that Argentina's inflation hit 103% year-over-year. This was reportedly the first time this happened since October 1991.
Recently, Argentina started to pay for Chinese imports in yuan instead of the US dollar. This move came as the country tried alleviating pressure on its diminishing dollar reserves.
In April, Argentina reportedly planned to use yuan in order to pay for around $1 billion worth of Chinese imports. Following the initial payments, the government wants to continue to use yuan to pay for about $790 million in monthly imports from China.
The Economy Minister of Argentina, Sergio Massa, explained that the goal of the decision was to reduce the outflow of US dollars from the country. The announcements were made during an event that happened after a meeting with Chinese Ambassador Zou Xiaoli.
This decision came at a time when Argentina was dealing with critically low levels of dollar reserves. The country was facing challenges regarding declining agricultural exports due to drought and other political uncertainties.
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Other News:
- Argentina’s inflation hits 103% year over year
- Argentina will start to pay for Chinese imports in yuan rather than dollars
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