South American nation hikes interest rate to 81%

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Argentina now has one of the world’s highest policy rates, after the country’s central bank raised its benchmark interest rate by 300 basis points to 81% on Thursday, according to data on the regulator’s website.

The dramatic move was made by the country’s monetary authority after inflation surpassed estimates in March, topping 104% year on year. The increase implies that the cost of numerous consumer products has more than doubled since the same time last year.

Last month, Buenos Aires had a $1.1 billion trade deficit, the most in nearly five years. Agricultural items, which account for the majority of the country’s export basket, plummeted 34% year on year due to an unprecedented drought in the farming business. Some Argentine analysts estimate a 4% drop in the country’s GDP.

According to Reuters, Argentina’s national currency, the peso, has touched record lows against the US dollar in popular parallel markets, where it is valued nearly half the official exchange rate.

The South American country’s international reserves fell to a year-low this week.

Argentina has had among of the highest inflation rates in the world for several years in a row. Buenos Aires has always attempted to keep inflation under control, but disputes have tarnished the country’s economic policies. As the economic crisis worsened last summer, three economy ministers took over in less than four weeks.

The International Monetary Fund (IMF) granted additional $6 billion in bailout funds in December. It was Argentina’s latest payment under a 30-month programme that is anticipated to total $44 billion.

Zimbabwe has the world’s highest benchmark interest rate, at 150%.