Argentina inflation posts mild acceleration after policy stumble

Monthly inflation in Argentina picked up some momentum last month as regulated price hikes collided with a peso overhang that sparked the currency’s worst month since 2023.

Consumer prices rose 1.9 percent in July, up from June’s 1.6 percent pace and in line with the median estimate of economists surveyed by Bloomberg. From a year ago, annual inflation cooled to a near five-year low of 36.6 percent, according to government data published Wednesday. 

Recreation, transport and restaurants led price increases in July, when the peso lost more than 12 percent against the dollar, its worst performance since President Javier Milei devalued the currency at the start of his government. 

Milei’s Central Bank attempted to unwind 15 trillion (US$11.3 billion) of short-term peso notes last month, encouraging investors to roll over into Argentine Treasury bonds in a bid to clean up its balance sheet. But the market didn’t absorb all the maturing notes, causing Argentina’s monetary base to spike and policymakers to subsequently jack up private banks’ reserve requirements in an effort to mop up the excess liquidity. 

The episode provoked critiques from Washington. Even after the International Monetary Fund granted a US$2-billion disbursement to Milei’s administration as part of the US$20-billion programme, Managing Director Kristalina Georgieva called for “clear communication of policies” and “greater clarity regarding the medium-term monetary regime.” 

Still, the peso’s double-digit losses didn’t fully bleed over into prices — nor dent Milei’s high approval ratings — compared to past periods of devaluation, and annual inflation is still heading down overall. That’s in part due to Milei’s tight control of the monetary base, one of the key ingredients to controlling inflation as the Central Bank no longer controls its benchmark rate. 

Economists surveyed by the monetary authority project annual inflation finishing this year at 27 percent, well down from triple-digit territory in 2024.