Argentina’s Central Bank has gone on record to say it won’t allow its key interest rate to drop below 62.5 percent in April, buttressing its campaign to protect the peso.
The commitment comes on top of the Central Bank’s pledge to freeze the amount of money in circulation until year-end to cool inflation, which was part of a record $56 billion credit agreement with the International Monetary Fund. The peso gained 1.5 percent Monday to close at 42.71 per dollar, tracking gains in other emerging markets.
The latest step comes after a renewed slump in the peso pushed it to a record low on March 27, threatening to exacerbate an inflation rate that hit 51 percent in February. Price increases have remained stubbornly high after the bank eased policy this year.
"Perseverance in the strict control of the evolution of the monetary base will lead to a reduction in inflation in upcoming months," the bank said in a statement after a meeting of its monetary policy committee.
Monday’s announcement is the latest twist in the past year for the bank, which has had three presidents and a complete policy overhaul on top of the IMF bailout. It pulled out emergency measures last year to handle Argentina’s currency crisis and recession.
As reported by bloomberg.com, the peso lost more than half its value against the dollar and the economy fell into recession as investor concern about the nation’s deficits helped spark the peso’s plunge.
The government and IMF have long forecast that the economy will start to rebound in the second quarter of this year, backed by Argentina’s soy harvest and exports.
