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Argentina Raises Key Rate to 40%, Bringing Economic Uncertainty


BUENOS AIRES — Since his 2015 election, President Mauricio Macri has pushed to reconnect Argentina to the global financial system, after years of isolation.
His approach — emphasizing lower tariffs, accurate economic data, trade pacts and the freer flow of capital — was largely aimed at coaxing foreign investment back to Argentina and ending the economic exile that followed the country’s default in 2001.
But over the last week, Argentina has been reminded that when capital is free to flow in, it can also flow out, creating profound economic implications.
With foreign investors pulling their money en masse, Argentina’s central bank was forced to take drastic action to stabilize the country’s currency. On Friday, policymakers lifted the benchmark interest rate to 40 percent after days of intervening heavily in financial markets.
While it helped settle the markets, the move will weigh on the prospects for the president’s ambitious economic overhaul. It also has the potential to crimp growth, adding to political discontent.
The rate increase, a day after the Argentine peso fell 8.5 percent against the dollar, was the third in a week. The central bank said it would use “all the tools at its disposal” to slow inflation, which in March was up 25 percent from a year earlier, to 15 percent this year, a goal most analysts now see as unrealistic.
In parallel, officials announced that they would cut government spending, and reduce the primary budget deficit to 2.7 percent, from the earlier goal of 3.2 percent. Their decision was seen as a response to criticism from investors that Mr. Macri’s government had not been cutting spending quickly enough.
Mr. Macri was sworn into office in December 2015. Argentina had been closed to international markets for more than a decade amid a long-running legal fight with bondholders that followed a default on its debt.
Early on, Mr. Macri’s policies were greeted with widespread optimism by financial markets, which gobbled up the country’s newly issued bonds.
POLITI, D. MATT, P Argentina Raises Key Rate to 40%, Bringing Economic Uncertainty. The New York Times, 2018. Disponível em: <https:// www.nytimes.com/2018/05/04/business/economy/argentina-economyinterest-rates.html?rref=collection%2Fsectioncollection%2Famericas&actio n=click&contentCollection=americas&region=stream&module=stream_unit &version=latest&contentPlacement=8&pgtype=sectionfront>
According to the fragment text above, which other containment action was taken by officials?

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