Argentina Raises Key Interest Rate to 69.5% in Biggest Hike Since 2019 (2024)

FAQs

Why does Argentina have such a high interest rate? ›

Central banks across Latin America have raised rates this year to combat high inflation, but prices have continued to stay hot as high levels of all-cash workers and businesses make monetary policy less effective than in developed economies.

Prices rose at an annual rate of 83% in September, one of the highest in the world. Argentina's longstanding practice of having the central bank print money to finance public spending is the main driver of inflation. More money chasing the same amount of goods bids up prices.

The Fed, which announced a smaller quarter-point rate hike this week, has raised interest rates from 0.25 percent in March 2022 to a current level of 4.75 percent. In turn, inflation rates have dropped from a peak of 9.1 percent in June 2022 to 6.5 percent in December 2022.

Argentina Lending Interest Rate is at 35.56%, compared to 29.39% last year.

However, at higher rates, people are unwilling to borrow. When higher interest rates are coupled with asymmetric information, banks provide fewer loans. The tighter lending standards mean that consumers will cut back on spending and consumption, which affect national spending.

Generally, higher interest rates increase the value of a country's currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country's currency.

You think U.S. inflation is bad? Eight percent, more or less - certainly more than we're used to. But Argentina has an inflation rate of 83%. The government has announced new exchange rates between the U.S. dollar and the country's peso.

Many Argentines now keep their savings in dollars hidden inside their homes, rather than at banks. And some are keeping their U.S. currency in safe deposit boxes, like these, at Ingot.

The average mortgage rate in 1990 was 10.13%, but it slowly fell, finally dipping below 7% to come in at 6.94% in 1998. One big reason for the economic growth and declining inflation seen later in the decade was the arrival of the internet in the mainstream consciousness.

So what does a Fed rate hike mean for you? “Expect to pay more on the interest charges from your credit card company, and auto loans and mortgages will also become more expensive,” says Ken Tumin, LendingTree's senior banking industry analyst.

What did the Fed hike the interest rate to? ›

The central bank's benchmark rate is now in a range of 4.5 percent to 4.75 percent, its highest level in 15 years.

Right now, good mortgage rates for a 15-year fixed loan generally start in the 5% range, while good rates for a 30-year mortgage typically start in the 6% range. At the time this was written in Feb. 2023, the average 30-year fixed rate was 6.09%, according to Freddie Mac's weekly survey.

The inflation rate for consumer prices in Argentina moved over the past 42 years between -1.2% and 3,079.8%. For 2022, an inflation rate of 72.4% was calculated. During the observation period from 1980 to 2022, the average inflation rate was 205.7% per year.

Argentina registered inflation of 94.8 percent in 2022 – its highest official annual figure since 1991 and the hyperinflation registered in the late 1980s and at the beginning of the 1990s, the INDEC national statistics bureau confirmed on Thursday.

Brokerages often see an uptick in trading activity when the economy improves and in higher interest income from higher interest rates. Industrials, consumer names, and retailers can also outperform when the economy improves and interest rates move higher.

By raising the bar for investment, higher interest rates may discourage the hiring associated with business expansion. They also cap employment by restraining growth in consumption. If demand drops, businesses may reduce output and cut jobs.

Your Credit Score May Fall. Higher interest rates can cause those with mortgage and credit card debt to struggle as payments rise, leading to missed payments and delinquent accounts. As a result, borrowers may see their credit scores fall when interest rates climb.

Argentina defaulted and suffered bank runs as the Baring Brothers faced failure. The crisis was caused by the lack of co-ordination between monetary policy and fiscal policy, which ultimately led to the collapse of the banking system.

Agriculture, forestry, and fishing. Argentina is one of the world's major exporters of soybeans and wheat, as well as meat.

The runaway inflation has left many in the country mired as they turn to barter and parallel currency markets amid dwindling Central Bank reserves, a bloated fiscal deficit, and a looming debt bomb. But this is not the country's first dance with economic danger.

Which country has the highest interest rate in the world? ›

First, we discuss why the case of Argentina is generally regarded as exceptional: the country was among the richest in the world at the beginning of the 20th century, but it gradually lost this place of privilege.

Argentina benefits from rich natural resources. Argentina's economic performance has historically been very uneven, with high economic growth alternating with severe recessions, particularly since the late twentieth century. Income maldistribution and poverty have increased since this period.

Argentina is considered a paragon of the middle-income trap, because it has been unable to innovate and upgrade the economy to a high-income economy. The country has known rapid economic growth in the 19th century, but this growth stagnated radically in the 20th century.