Buenos Aires – Argentina’s central bank announced a policy shift monday aimed at stabilizing the peso amid persistent inflation, linking official exchange rate bands to the latest Consumer Price Index data [[3]]. The move,announced by Central Bank Governor santiago Bausili,represents a departure from previous fixed monthly adjustments and comes as the country navigates a complex economic landscape and a US$20 billion agreement wiht the International monetary Fund [[3]]. despite the adjustments, officials maintain that current currency controls – known as the “cepo” – will remain in place, at least for now.
Argentina’s central bank governor, Santiago Bausili, announced Monday a shift in its foreign exchange policy, incorporating monthly adjustments to currency bands alongside increased purchases of reserves. The move, he asserted, will not accelerate inflation and that no easing of current currency controls – often referred to as the “cepo” – is planned.
The policy change, effective in January, will link the upper and lower limits of the official exchange rate to the latest Consumer Price Index (IPC) data released by Indec. Previously, these bands were adjusted by a fixed 1% monthly rate. For example, the bands will reflect November’s IPC of 2.5%, a significant departure from the previous rigid adjustment. This shift comes as Argentina grapples with persistent economic challenges and seeks to stabilize its currency.
“Adjusting the bands to reflect inflation does not mean inflation will be higher or lower,” Bausili stated during a press conference. “It provides a degree of flexibility to the scheme. We believe this contributes to reducing uncertainty going forward.” He clarified that the new measures do not necessarily imply an increase in the price of the dollar.
Illustrating the central bank’s commitment to the new policy, Bausili noted that the Treasury purchased US$320 million in the foreign exchange market Monday. He explained that without this intervention, the exchange rate would have faced downward pressure. The central bank hopes this increased intervention will help bolster reserves and stabilize the peso.
Officials anticipate that a recovery in economic activity will drive increased demand for pesos, enabling the central bank to accumulate reserves without creating exchange rate or inflationary pressures. The purchase of dollars would be offset by the absorption of pesos by economic agents. However, Bausili acknowledged that there is no predetermined path for this process and that intervention will remain discretionary.
Consultancy firm Equilibra viewed the announcements as positive, but cautioned that they represent a reduced emphasis on the initial goal of disinflation. “The bands within which the exchange rate moves are no longer moving below inflation and are now adjusting in line with past inflation, adding an element of inflationary inertia,” the firm noted.
November’s inflation rate continued an upward trend for the sixth consecutive month, reaching 1.9% – tying July and August. Rising dollar values, increasing beef prices ahead of the holidays, and increases in public service tariffs have all contributed to the sustained inflationary pressure.
Equilibra also highlighted the start of significant dollar purchases by the central bank as a positive development, but raised doubts about the feasibility of reserve accumulation. The firm stated that the Treasury will need to secure financing or acquire dollars to meet debt obligations in hard currency, amid increased import payments and savings demand. “This is likely the first step towards a currency liberalization in 2026, before the executive elections begin,” the consultancy added.
When questioned about the possibility of liberalization, Bausili was firm: “No modifications are contemplated regarding the existing currency restrictions.” This statement addresses a key demand from investors, businesses, and international banks.
Several of the current restrictions were detailed in August in the document summarizing the first review of the US$20 billion agreement with the International Monetary Fund (IMF). The program, signed in April, included a partial easing of controls for individuals, who can now purchase dollars at the official exchange rate through online banking.
Key restrictions still in place include the “cross-restriction,” which prevents access to the official market for those who have operated in the CCL or MEP dollar markets within the 90 days before or after. These timeframes were recently reduced to 15 business days for individuals, while remaining at 90 business days for banks that purchased official dollars to subscribe to the Treasury’s latest bond tender in dollars.
The scheme also maintains limitations on payments for imports of goods and services, with restrictions on advance payments, 90-day waiting periods for services between related parties, and specific prohibitions on imports linked to soybeans until export revenues are settled.
Furthermore, restrictions continue on the remittance abroad of profits and dividends corresponding to periods prior to January 1, 2025, as well as on transfers of current income by non-resident individuals.
Finally, the agreement with the IMF includes limitations on the payment of interest and amortization of external debt, including the obligation to settle funds in the local market, restrictions on early payments, and the need for prior authorization from the central bank to cancel capital or interest with related non-resident counterparties.
