Argentine Central Bank Emergency-Hikes Rates To 60% To Stop Peso Collapse

Thursday, August 30, 2018
By Paul Martin

by Tyler Durden
ZeroHedge.com
Thu, 08/30/2018

Update: Having met pre-market, it appears the Argentina Central Bank (CBRA) decided that if things got worse they would ’emergency hike’ rates. And as the peso collapsed to 39/USD, they have just raised the key 7-day leliq rate to 60% (a 1500bp hike)! The rate was last hiked from 40% to 45% on Aug 13th. They also confirmed there will no rate cuts until December.

As Bloomberg’s Sebastian Boyd notes, the real effective exchange rate is now the lowest since 2011, according to JPMorgan’s index, and I have seen a number of economists today calling the currency cheap. If 60% isn’t enough to stop the selloff (and chasing Argentine carry has been a horrible trade lately), the next measure might be a shock fiscal adjustment. But a 60% monetary policy rate is going to provide a shock of its own. For an economy that may already be in recession, that’s brutal.

FX Market liquidity has entirely evaporated with the bid-ask spread now at its widest since 2002’s crisis..

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