EdRooney
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Good question, Nap.
The basic explanation is:
It's generally the rate that banks use to loan to each other, and it's a benchmark for retail rates, like Certificates of Deposit which the banks lend to customers after they've taken their share.
Let's say you have a bunch of cash. What most people here do is to try to get it into dollars, to avoid getting killed on inflation. But if the interest rate is notably higher than what inflation is, it becomes pretty attractive to keep your stuff in pesos and park it in a fixed rate deposit instrument that will give you back more money (provided you trust Argentine banks will not default, which is a whole 'nuther bag of worms).
For example, if interest rates were 75%, you'd be pretty dumb to buy dollars with your pesos when you can get a super high guaranteed rate of return on them. But they're not 75%, they're at 27% which may or may not be better than inflation, no one really knows. But to put it in perspective, rates were hovering around 15%, so it looks like an intentional move to make holding on to pesos more attractive.
The basic explanation is:
It's generally the rate that banks use to loan to each other, and it's a benchmark for retail rates, like Certificates of Deposit which the banks lend to customers after they've taken their share.
Let's say you have a bunch of cash. What most people here do is to try to get it into dollars, to avoid getting killed on inflation. But if the interest rate is notably higher than what inflation is, it becomes pretty attractive to keep your stuff in pesos and park it in a fixed rate deposit instrument that will give you back more money (provided you trust Argentine banks will not default, which is a whole 'nuther bag of worms).
For example, if interest rates were 75%, you'd be pretty dumb to buy dollars with your pesos when you can get a super high guaranteed rate of return on them. But they're not 75%, they're at 27% which may or may not be better than inflation, no one really knows. But to put it in perspective, rates were hovering around 15%, so it looks like an intentional move to make holding on to pesos more attractive.
