BUENOS AIRES (Reuters) – Argentina’s central bank will start selling U.S. dollars on the parallel foreign exchange market in a move to fight inflation and freeze the money supply, the government said on Saturday.
Economy Minister Luis Caputo announced the new strategy on messaging platform X on Saturday, saying it would “contribute to deepening the process of controlling inflation.”
Caputo said that starting Monday, when Argentina’s central bank prints pesos to buy U.S. dollars in the official foreign exchange market, it will sell an equal amount of dollars in the parallel “CCL” foreign exchange market, effectively balancing Argentina’s monetary base.
“Argentina is no longer printing pesos. This is a historic event,” Caputo said in a radio interview. “We were beating inflation by a few points, but this is a knockout,” he added.
The announcement came after official data released on Friday showed that monthly inflation surpassed May’s, ending five months of slowing inflation in June.
The strategy outlined by President Javier Milley’s government aims to stabilize the money supply, curb inflation and narrow the widening gap between Argentina’s official exchange rate and the parallel exchange rate traded on financial markets.
The South American country’s peso has deviated widely from the official rate for years due to strict currency controls and has been falling on the parallel market since the beginning of this year.
At Friday’s close, the official exchange rate was trading at 919.5 pesos per dollar and the so-called “CCL” rate was trading at 1,416.2 pesos per dollar, while the widely used black market “blue” rate fell to an all-time low of 1,500 pesos per dollar on Friday.
Milley celebrated the announcement Saturday on the sidelines of the Sun Valley Conference, an invitation-only annual gathering in Sun Valley, Idaho, hosted by investment bank Allen & Co., where he and Caputo pitch investors.
“Argentina’s monetary base is no longer increasing and this is very shocking news,” Millay said in a phone interview with Argentine news station LN+, adding that the plan would “accelerate the deflationary process in the economy.”
Argentina’s inflation rate has slowed dramatically since Milley took power late last year, falling to 4.2% in May from 25.5% in December and 4.6% in June.
(Reporting by Jorge Otaola; Writing by Brendan O’Boyle; Editing by Daniel Wallis, Diane Craft and Nick Zieminski)
