The central bank announced a profound change in the monetary regime. From January 2026, Flotation belts of the peso against the dollar They are no longer fixed, but move in line with monthly inflation.
The measure, which replaces a relatively rigid system with a price-accompanying system, aims to achieve this Build exchange stability in an economy that has suffered from sudden exchange rate fluctuations for decades.
The question inevitably arises: Can a monetary system that follows inflation create stability?
From the previous regime to the current transition
In recent months, Argentina’s exchange rate policy has been organized on the basis of a controlled decline in the official exchange rate. As announced, the dollar moved at a relatively low monthly rate, well below inflation. In practice, this regime acted as a nominal anchor: The aim was to moderate inflation expectations and prevent prices from rising by containing the dollar price.
The problem is that this anchor became more and more artificial. As monthly inflation systematically exceeded the exchange rate adjustment rate, the peso appreciated in real terms and the result was an increasingly distorted system that was difficult to maintain and had a negative impact on economic activity, foreign trade and central bank reserves.
The new system aims to correct these imbalances. By allowing exchange rate spreads to adjust according to inflation, the exchange rate is no longer systematically appreciated and implies a sincerity of the dollar price, improving external competitiveness and reducing incentives to act against the central bank.
In addition, an exchange rate that is more closely linked to prices facilitates the formation of reservesas the central bank can intervene by buying dollars without raising immediate expectations of a delay or an abrupt correction.
The central role of credibility
The most sensitive point of the new regime is this Lack of a clear nominal anchor. In the previous system, the depreciation rate, imperfect as it was, acted as a reference, and in the new system virtually all nominal variables move in response to inflation. The system will become more coherent, but also more vulnerable if inflation does not fall.
The focus is on credibility. If the market assumes that the Treasury will finance itself through monetary issues again, the expected inflation will be higher and with it the adjustment of the exchange rate. So the regime doesn’t fix the problem, but rather changes the variable that determines whether it works or not. Tracking inflation can only have a stabilizing effect when inflation is under control or on a significant downward trend.
Therefore, fiscal policy becomes the true anchor of the system. Without fiscal discipline and a credible belief that the deficit cannot be monetized, the regime loses its relevance And in a country with a long history of fiscal dominance, this is a challenging bet. The central bank’s technical rules are not sufficient. What is needed is policy coherence, coordination between the different economic axes of government and, above all, continuity over time. Only then can a monetary system that follows inflation become stable.
Predictability is not prosperity
That the exchange rate moves according to inflation creates predictability. If economic agents know that the dollar will adjust at a similar rate given inflation of 2% per month, short-term uncertainty is reduced and the possibility of abrupt corrections is minimized.
However, predictability, although a necessary condition, It is not synonymous with well-being or positive balance. An economy can be perfectly stable and predictable in a poor equilibrium. If everything increases by 2% per month, prices, exchange rates and salaries may move in an orderly manner, but that does not mean growth, investment or an improvement in purchasing power. It simply means that the system is stable at 2%.
To achieve a virtuous balance Additional conditions are required. Declining inflation, a currency that returns to basic value reserve functions, a financial system that converts savings into productive investments, and a competitive external sector without the need for constant controls. The exchange rate regime can contribute to this goal, but does not guarantee it alone.
Conclusions
The new monetary regime represents a relevant change, although not revolutionary. It recognizes the limitations of current policies and seeks to correct their distortions. Adjusting the exchange rate for inflation brings consistency and predictability to a system that has historically been dominated by discretionary decisions.
But the underlying question remains open.. A system that tracks inflation can provide nominal stability, but it will only be a step toward deeper stability when inflation itself ceases to be an everyday problem. Without fiscal discipline and credibility, there can be no clear inflation horizon and the risk is to be trapped in a stable but mediocre equilibrium. Argentina has already experienced this scenario. The difference this time will depend less on the regime’s technology and more on the political and institutional capacity to maintain fiscal discipline.
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