Faced with calls from the International Monetary Fund (IMF) to tighten monetary policy, the Central Bank of Argentina raised its benchmark interest rate for the first time in more than a year.
The Central Bank of Argentina raised the benchmark Leliq interest rate from 38% to 40%. Although the inflation rate is as high as about 50%, the 38% interest rate has been maintained for more than a year. So far, the bank’s unorthodox approach is in sharp contrast to the wave of interest rate hikes by central banks around the world, which are all seeking to fight accelerated inflation.
IMF officials called on Argentina in December to implement an "appropriate" monetary policy as part of the government's negotiation of a new plan to reschedule approximately US$40 billion in payments. They specifically called for interest rates in Argentina to exceed the inflation rate.
The Argentine central bank is not independent of the Argentine government, printing money to fund government expenditures throughout the COVID-19 pandemic has caused people to worry about future inflation. Economists expect prices in Argentina to rise by 52% this year.