Argentina's government is bolstering its economic defenses as it battles runaway inflation that hit 109% in April, fast draining central bank foreign currency reserves, a weakening peso and simmering market fears of a sharp-shock devaluation.
An official source told Reuters the rate hike would be 600 basis points, bringing the rate up to 97%. That would follow back-to-back hikes totaling 1,300 basis points in April.
"The Casa Rosada is concentrating for now on seeking resources to contain the bleeding of reserves and alleviate the impact of the rise in prices," it said.Argentina's inflation rate has accelerated despite price controls and regular rate hikes, raising fears of a return to hyperinflation that hit the country just over 30 years ago, the last time 12-month price increases went into triple digits.
That's created a dilemma for the government: how to tame inflation and avoid a crash in the currency, while protecting the scarce foreign currency reserves in the bank. Some analysts estimate net reserves are indeed negative.
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