Argentina's central bank has boosted its interest rates by 15 percentage points to 60% after the peso plummeted on Thursday.
The Banco Central de la Republica Argentina took drastic action after the peso fell by 15% in early trading on Thursday (30 August).
The peso's Thursday decline followed an earlier fall of 7% on Wednesday, culminating in the currency's steepest decline since it floated in 2015. It continues to be the worst-performing currency of 2018, falling 46.3% against the dollar since 1 January.
However, the move had little effect initially, with the peso falling almost 18% at its worst, before recovering slightly. At the end of the US trading day it was down almost 12 per cent at 38.53 pesos to the US dollar.
On Wednesday, the embattled country's president Mauricio Macri urged the International Monetary Fund to speed up the issuance of a $50bn bailout package.
Amid its economic woes, the Banco Central de la Republica Argentina was tasked in 2016 with the sustainable and systematic decrease in the inflation rate.
In July the year-on-year inflation rate stood at 31.2%, up from 29.5% in June. The central bank is targetting an annual inflation rate of 5% in 2022.
In addition, it is in charge of the development and deepening of the country's domestic financial system, together with macro-prudential supervision and regulation of the financial system in accordance with the best international standards.
Paul Greer, portfolio manager of the Fidelity Emerging Market Debt fund said the central bank's latest policy move, in addition to the IMF "engineering fiscal austerity" in Argentina, "it looks likely that the economy is heading for a hard landing recession over the next 12 months."
He added: "This will add further political pressure on President Macri ahead of [the Presidential Elections] in October 2019 given his aspirations for another term.
"We are expecting inflation to go higher, public sector wage negotiations to be extremely difficult for the government, and general labour strikes over the next year.
"The potential for a return of Peronism to Argentinian politics is one that will deeply concern the markets given the awkward relationship investors had with the Kirchner dynasty between 2003-2015.
"There are no easy answers for Argentina to its current woes.
"Argentina needs to rebalance its economy and the inevitable recession will help alleviate its current account deficit problem, but will make its fiscal targets harder to achieve.
"It is clear that tighter monetary policy alone is not enough for Argentina."
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