BUENOS AIRES (Reuters) -Argentina’s central bank will start selling U.S. dollars on the country’s parallel currency markets in a bid to fight inflation and freeze the country’s money supply, the government said on Saturday.
Economy Secretary Luis Caputo announced the new strategy on messaging platform X on Saturday, saying it would “contribute to deepening the disinflation process.”
Starting Monday, when Argentina’s central bank issues pesos to buy U.S. dollars on the formal foreign exchange market, the bank will effectively balance Argentina’s monetary base by selling an equivalent amount of dollars on the parallel “CCL” exchange market, Caputo said .
“There are no more pesos being printed in Argentina in any way. It is a historic novelty,” Caputo said later in a radio interview. “We beat inflation by (a few) points and this is the ‘knockout’ blow,” the minister added.
The announcement comes after official data published on Friday showed that a five-month period of declining inflation ended in June, with monthly inflation rising above May.
The strategy outlined by President Javier Milei’s government aims to stabilize the money supply, reduce inflation and help close the widening gap between Argentina’s official exchange rate and parallel exchange rates on financial markets.
The South American country’s peso has been falling on parallel markets since the start of the year, diverging sharply from the official rate for years due to strict currency controls.
At the end of Friday, the official exchange rate was 919.5 pesos per dollar, while the so-called “CCL” rate was 1,416.2 pesos per dollar. Meanwhile, the widely used “blue” rate on the black market weakened to an all-time low of 1,500 pesos per dollar on Friday.
President Milei celebrated the announcement Saturday from the sidelines of the Sun Valley Conference, the annual invitation-only gathering of investment bank Allen & Co in Sun Valley, Idaho, where the president and Caputo are courting investors.
“The monetary base in Argentina is no longer increasing, and this is extremely powerful news,” Milei said during a telephone interview with Argentine news channel LN+, adding that the plan would “accelerate the deflation process in the economy.”
Since Milei came to power late last year, inflation in Argentina has slowed dramatically, from 25.5% in December to 4.2% in May. The figure for June was 4.6%.
