The European Central Bank announced last week it would raise interest rates for the first time in 11 years. While borrowers in the Eurozone will face higher costs, the ECB’s decision pales in comparison to the monetary tightening processes seen in Brazil and Argentina.
No G20 economy increased interest rates as much as South America’s two largest economies.
In the first year of the pandemic, the challenge was to promote liquidity and stimulate economic activity. In the second, inflation made nations gradually reverse momentum. And the movement only intensified in 2022.
Argentina increased its benchmark interest rate by 14 percentage points to 52 percent a year as a means to tame an inflationary crisis that seems to be out of control.
In Brazil, the Central Bank has increased the country’s benchmark interest rates by more than 11 percentage points since 2020, up from 2 percent in December 2020 to 13.25 percent last June — the highest level in five years.
At its last meeting, the bank’s monetary policy committee signaled that it could bump the rate even higher in August, with markets expecting it to end 2022 at 13.75 percent.
In Venezuela, which is not in the G20, the benchmark rate went up by 19 points to more than 57 percent yearly.