A decision by the central bank in Argentina to raise interest rates on certificates of deposit will increase peso deposits after a recent flight to dollars, a government official said Friday.
“The central bank is encouraging saving in pesos,” Cabinet chief Anibal Fernandez said during a televised press conference.
The monetary authority late Thursday announced an increase in interest rates on long-term fixed deposits in pesos, effective Monday. The bank raised the rates to 23.6 percent from 22.6 percent for 30-day deposits, and to 26.2 percent from 25.6 percent for deposits of more than 90 days.
Fernandez said a reason behind the rate hike is “financial speculation”, hinting at a surge in demand for dollars this month.
With inflation running at 30 percent annually and concerns on swelling of a faster depreciation of the peso against the dollar, Argentines have been turning to greenbacks to safeguard their savings. The demand for dollars has stoked buying on the black market because of restrictions on accessing the official market, causing the black-market rate to plunge to 15 pesos per dollar this week. That was a spread of 64 percent compared with the official rate of 9.16 per dollar, which is controlled by the central bank.
With the announcement of the higher interest rates, the blue rate dropped to 14.64 per dollar in early trading Friday.
“We will continue to use all of the measures we can to prevent volatility from accentuating,” Central Bank President Alejandro Vanoli said late Thursday in a televised press conference. “It is important for people to see that our currency is really a good business.”
Vanoli spoke minutes after President Cristina Fernandez de Kirchner slammed the opposition for fueling the demand to dollars ahead of the Oct. 25 presidential election.
“They want to scare us with runs that don’t exist,” she said.
By Charles Newbery