Argentina will announce a package of measures to contain inflation – 05/14/2023 – Market

The government of Argentina will announce this Monday (15) a package of measures to try to contain inflation and stabilize the peso against the dollar.

According to the Reuters agency and the Argentine newspapers Clarín and La Nacíon, the basic interest rate will rise from 91% to 97% per annum. If confirmed, it will be the second increase in the index in less than a month. On April 27, the rate rose from 81% to 91%, the highest level in 20 years.

At the same time, the Central Bank of Argentina is likely to increase its intervention in the foreign exchange market to stabilize the peso. According to Argentine publications, the measure aims to meet a request from the IMF (International Monetary Fund) and accelerate agreements with the body, with China and with Brazil.

The package was defined after meetings between the Minister of Economy, Sergio Massa, and the president of the Central Bank, Miguel Pesce.

Currently, Argentine inflation is at 109% accumulated between May of last year and April of this year. Last month alone, inflation was 8.4%, double the rate recorded in the entire last year in Brazil (4.2%).

According to the Clarín and La Nacíon newspapers, the government is yet to announce other measures this Monday morning (15). One of them is negotiating with the Brics bank to facilitate the exchange of currencies with Brazil.

Massa is due to travel to Beijing on May 29 to try to bring more resources to the country. Internally, the Argentine government should reduce the interest rates of the “Agora 12” program, with the objective of stimulating the consumption of domestic products.

According to the newspaper La Nacíon, there will also be an increase in “cashback” on the debit card in payments made by the most vulnerable population. The publication states that other measures this week may be disclosed to complement the package.

Last week, Massa had already announced increases in retirement, pensions and social benefits after 90 days, as well as in the floor for paying income tax.

If a year ago, those who earned more than 225,000 Argentine pesos had to declare tax, now they will only have to declare those who earn more than 506,000 (the equivalent of approximately US$ 1,100 or R$ 5,600 in the parallel exchange rate). The increase is 125%, therefore above accumulated inflation.

Social security and scholarships given by the government to low-income families also had an increase of 130%, above inflation in the last year – a real increase of 7%, according to Massa. With this, an Argentine pensioner will earn from 121,407 pesos in June (US$ 260 or R$ 1,300).

With information from Reuters