In response to the Federal Reserve’s most recent rate hike of three-quarters of a percentage point on Sept. 20, Ibero-American central banks are following suit, in a desperate attempt to stem capital flight resulting from the Fed’s higher rates, and also deal with devaluation pressures while inflation continues to soar.
On Sept. 6, even before the Fed’s latest hike, Chile’s central bank raised its rate by 100 basis points to 10.75%, from 9.75%, much higher than anyone expected. For the moment, Brazil’s central bank has decided to keep its benchmark Selic rate the same at 13.75%, but has announced that it will remain “vigilant.” On Sept. 15, Argentina’s central bank raised its rate by 550 basis points to a whopping 75%, one day after the official annual inflation rate came in at 80%, well beyond forecasts. Analysts predict that inflation will reach 100% by year’s end.
