Argentina raises interest rate, devalues peso after shock primary election

Argentina's central bank will raise the benchmark interest rate to 118% from 97% previously, an official source said Monday, adding the country's currency will be devalued to 350 pesos per dollar in the aftermath of a shock primary election.

The Argentine central bank rate is now at its highest level since April 1991, when the country was just emerging from a hyperinflation crisis.

Sunday's primary vote, seen as a reliable bellwether for the upcoming presidential elections, propelled ultra-right outsider Javier Milei, who wants to axe the central bank and dollarize the economy, to first place with some 30% of the vote.

The official peso plunged nearly 18% on Monday morning to just over 350 pesos per dollar and the source said the exchange would be fixed at this rate until the October presidential vote.

The parallel, "blue" rate meanwhile jumped from 605 pesos to 685, as worried Argentines rushed to buy dollars.

Latin America's third-biggest economy is battling a severe economic crisis with sky-high inflation and dwindling central bank reserves - partly the result of a foreign debt crisis inherited from right-wing former President Mauricio Macri in 2019.

At: https://www.reuters.com/markets/currencies/argentina-raises-interest-rate-devalues-peso-after-shock-primary-election-2023-08-14/

Pedestrians walk by Argentina's Central Bank building in downtown Buenos Aires recently.

A surprisingly strong showing by far-right outsider Javier Milei yesterday in nationwide presidential primaries - where Milei garnered 30%, compared to 21% for center-left candidate Sergio Massa and 17% for hard-right candidate Patricia Bullrich (both, establishment figures) - sent Argentines rushing to purchase dollars on the parallel, "blue" market.