(Bloomberg) -- Argentina’s central bank held its benchmark interest rate at 52%, according to a person with direct knowledge of the matter, even as inflation accelerated to its fastest pace in 30 years.
The decision by the bank’s board came on Thursday after yields at the latest Treasury note auction rose by as much as 400 basis points to 63.5% earlier this week, the person said, asking not to be named because the decision isn’t public yet. Policy makers want to encourage banks to purchase Treasury notes rather than the benchmark Leliq notes that the central bank sells, the person added.
A central bank spokesman did not immediately reply to a request for comment.
The decision takes financial markets by surprise as the bank was broadly expected to raise rates, as it has done in recent months every time official data shows inflation accelerating.
Argentina’s consumer prices rose 64% in June from a year ago, and are expected to increase at an even faster rate in coming months after the sudden resignation of Economy Minister Martin Guzman led many businesses to jack up prices overnight last week.
Read More: Argentines Brace for 90% Inflation After Economy Minister’s Exit
Argentina has had trouble finding enough participation to roll over maturing local debt in recent auctions as many investors fear the nation’s local debt burden is unsustainable. Earlier this week, the central bank offered a put option on its local bonds to encourage banks to purchase Treasury assets. The country has a large local maturity of around 500 billion pesos ($3.9 billion) at the end of July.
Guzman’s replacement, Economy Minister Silvina Batakis, pledged this week to maintain interest rates, measured by the effective annual rate, above inflation. So-called real positive rates are a pillar of Argentina’s $44 billion agreement with the International Monetary Fund.