The decision aims to promote "positive real returns on investments in local currency" and "prevent financial volatility from acting as a driver of inflation expectations," the Bank said.
In April, monthly inflation rose 8.4 percent compared to March. The decision complements a package of economic measures the government announced over the weekend to reduce inflation, stabilize the exchange rate and guarantee consistent levels of economic activity.
"The central bank will continue to monitor the evolution of the general level of prices, the dynamics of the financial market and exchange rates," the Bank said.
Inflation in Argentina continued to accelerate faster than expected in April and rose to 109% in April as the fall in the peso, fueled by devaluation fears, drove prices higher, Bloomberg reports . pic.twitter.com/rTN0HFTSWl
Other measures include stepping up negotiations with the International Monetary Fund (IMF), encouraging consumer spending by lowering the interest rate on credit card purchases, and offering tax breaks to spur economic activity.
In addition, President Alberto Fernandez's administration said it will suspend current anti-dumping regulations in order to favor the importation of inputs used to produce essential products for industry and activity in different value chains. The decisions of the Argentine central bank, however, may not be immediately effective in controlling inflation.
“Interest rate hikes are of course the main strategy to combat inflation, but they take time... When a central bank raises the interest rate, the effects are felt some two or three months later, and that timescale is not effective in Argentina's situation,” Miguel Kiguel, former deputy manager at the Central Bank, said, as reported by CNN.