Argentina closes 2025 with a relevant – expected and mandatory – change in its monetary policy. It was not a U-turn or a complete break with the previous pattern, but rather a profound regime change: Exchange rate bands adjusted to past inflation, the explicit abandonment of the exchange rate as an anti-inflationary anchor and a clearer focus on the accumulation of international reserves.
The market perceived the trend reversal positively. Bond spreads have tightened, sovereign risk has returned to cyclical lows and the government is preparing to smoothly pass a historically sensitive test: January payments. However, As is often the case in Argentina, the challenge lies not in the announcement or technical design, but in implementation, policy consistency and data validation.
From a conceptual perspective, the change is correct. The previous regime of fixed peg crawling had led to an increasing real appreciation and over-reliance on controls, regulations and discretionary interventions. Supporting the exchange rate as an anti-inflationary anchor could accelerate disinflation in the short term, but at the cost of deteriorating the central bank’s balance sheet and increasing external fragility.
As is often the case in Argentina, the challenge lies not in the announcement or technical design, but in implementation, policy consistency and data validation.
The new system explicitly recognizes a compromise that has been avoided and debated for years: it is not possible to deplete air quickly while simultaneously rebuilding reserves without cost. By abandoning the use of the dollar as a rigid anchor, disinflation will be slower, but the program will gain consistency. In an economy with high salary and contract indexation, high historical pass-through and inflationary memory, this choice is realistic rather than voluntary.
Private forecasts agree that inflation could approach levels of around 17-20% per year in 2026. This is not a spectacular number, but it is a regime change compared to the previous dynamics. In this context, inflation-adjusted instruments naturally appear to be preferred, while extending nominal duration requires stronger signs of inflation convergence.
They were the reserves
However, the real essence of the new system lies not in the bands or the rate, but in the international reserves. Here is concentrated the main weakness of the macroeconomic program and probably the main requirement of international organizations. Without reserves, there is no credibility, there is no room to absorb shocks, and there is no orderly exit from controls. With reservations, the program gains time, degrees of freedom and political support.
However, the real essence of the new system lies not in the bands or the rate, but in the international reserves.
The government itself proposes an accumulation of reserves in the order of $10,000 million in 2026 as a base scenariowith more optimistic scenarios from some international banks increasing this figure to $15-17 billion. The number is not trivial: it implies an average buying rate of around $40-50 million per day, sustained over time. Attainable but demanding.
In this sense, January payments serve as a test. Argentina is facing maturities of around $4.2 billion. In recent weeks, the Treasury managed to raise almost $910 million through a (weak) local dollar offering, and the central bank made block purchases worth around $540 million. The result was that Treasury’s dollar deposits with the BCRA exceeded $1.9 billion, more than half of what was needed to meet the payments.
monetary policymaker
The relevant data is not only financial, but also political-monetary: the regime change announcements came before the formal implementation of the system, with the express aim of reducing country risk and improving rollover conditions. Monetary policy was no longer viewed as a purely technical matter and began to be integrated into financing and reserve requirements. It’s a more pragmatic approach and probably more effective.
Now the project is not without risks. The first is political. Slower disinflation leads to distributional costs and social tensions that can undermine the political capital needed to sustain the program. The second reason is inflation inertia. With a historically high pass-through, any deviation from the CPI can quickly be transferred to the exchange rate and vice versa.
Monetary policy was no longer viewed as a purely technical matter and began to be integrated into financing and reserve requirements. It’s a more pragmatic approach and probably more effective.
This highlights one of the most delicate points of the regime: the feedback between inflation and the exchange rate. By indexing the bands to past CPI, a jump in inflation can become an automatic validation mechanism for negative expectations.
The demand for money is very volatile and reversible. The dollarization of portfolios, the constant demand for dollars from the population that perceives the exchange rate as “gifted,” and the memory of previous crises limit the possibility of sustainable remonetization based solely on rates or regulatory design.
Argentina has taken this route on other occasions, with sadly familiar results. Design corrects rigidities, but does not inherently discipline expectations.
Another assumption that requires caution is remonetization. It is true that the monetary base is at a historically low level of around 4.2% of GDP, well below the long-term average. But In Argentina the demand for money is very volatile and reversible. The dollarization of portfolios, the constant demand for dollars from the population that perceives the exchange rate as “gifted,” and the memory of previous crises limit the possibility of sustainable remonetization based solely on rates or regulatory design.
The exchange problem
Finally, there is the exchange rate problem. Inflation-adjusted bands are a transitional system, not an end point. If they are maintained for too long without sufficient reserve support, this may lead to new tensions and expectations of permanent intervention. Argentine history shows that hybrid systems fail when they become implicit anchors without credibility.
In summary: The change in the monetary regime is positive and necessary. Correct obvious errors, improve technical consistency, and reorder priorities around a real anchor: reserves. But it is not a final solution. It is a demanding regime, sensitive to politics and dependent on daily executions. The right approach is neither uncritical enthusiasm nor automatic skepticism, but cautious optimism: selective exposure, indexed tools as natural reporting, tactical flexibility and a constant reading of the political front.
In Argentina, the rules will only be consolidated when the results speak for them.
About The Author
