Argentina’s Mauricio Macri raised the country’s interest rates to 40% in an attempt to defend the peso. Over the past months, the rate has risen from 27.25% in April. The peso is slumping because foreign investors are moving their money out of the peso and converting it to dollars. They are seeking the increased rates offered by the US federal reserve.
Seeing the peso falling, local Argentinians are following by converting the pesos into dollars. The slowing of the local economy is also leading to the flight from the peso. The current inflation rate in Argentina is running at an annualized 25.4%. The latest rake hike has shown some positive effect but it is still considered to be the poorest performing currency having lost about 19% since January.
Macri has initiated a pro market economic reform with a goal of cutting inflation to 15%. The reform is seeking to lower the deficit from 3.2% to 2.7%.