President Javier Milei’s government announced on Monday that it will adopt a new monetary framework and adjust the peso’s trading bands as part of a broader plan to build up the Central Bank’s international reserves.
In a statement, the Central Bank (BCRA) said it will link the peso’s trading bands to monthly inflation. Argentina has operated a semi-floating regime for the national currency since April, when the government eased access to foreign currency.
Argentina currently allows the peso to trade within a strict set of bands, a policy that has helped rein in inflation. Analysts say, however, that it has also contributed to an overvalued peso that is weighing on the economy.
At present, the Central Bank does not intervene in the market unless the exchange rate reaches either the upper or lower limit of the band against the US dollar. Under the current framework, the band’s ceiling rises and its floor falls by one percent each month.
That system, however, will change next year, the Milei administration said on Monday.
“From January 1, 2026, the ceiling and the floor of the exchange rate band will evolve each month in line with the most recent monthly inflation figure,” Central Bank Governor Santiago Bausili said at a press conference, referring to data published by the national statistics institute, INDEC.
So far in 2025, monthly inflation has ranged between 1.5 percent and 3.7 percent. November inflation stood at 2.5 percent.
As of Monday, the lower bound of the band was 921 pesos per US dollar, while the upper bound stood at 1,518 pesos per greenback.
The announcement shows that “there will clearly be an upward path for the wholesale exchange rate, which is what determines exports, imports and debt payments,” economist Ricardo Delgado said.
“It is better than what we’ve had until now, but it is still insufficient for sectors that produce and export,” Delgado told the TN television channel, referring to the impact of an overvalued peso on industry and producers.
IMF reaction
Alongside changes to the peso’s trading bands, the Central Bank also announced that it will roll out a new programme to build up international reserves.
In a statement, it said that from January 1 a phase of remonetisation and reserve accumulation will begin under what it described as “a consistent accumulation programme”.
“The Central Bank will begin a programme of international reserve accumulation consistent with the evolution of money demand and foreign exchange market liquidity,” the institution said.
It forecast that the monetary base will increase from 4.2 percent to 4.8 percent of GDP by December next year, allowing for the purchase of around US$10 billion, subject to market conditions.
The statement added that, if demand for money were to rise by a further one percent of GDP, reserve accumulation could increase to as much as US$17 billion “without requiring sustained sterilisation efforts.”
The policy shift was welcomed by the International Monetary Fund (IMF), which has repeatedly called on Argentina to strengthen its international reserve position.
Argentina’s exchange rate band system was agreed with IMF staff as part of a US$20 billion loan programme, of which US$14 billion has already been disbursed.
‘Important measures’
“We welcome the recent market-opening measures and the steps announced to strengthen the monetary and exchange rate framework, rebuild reserves and promote reforms that drive growth,” IMF spokesperson Julie Kozack wrote on X on Monday.
“We are working closely with the Argentine authorities on the implementation of these important measures,” she added.
Economy Minister Luis Caputo thanked Kozack for her remarks on the same social media platform, in a message that was also reposted by Milei.
A few days earlier, Kozack had said that “a more ambitious path of reserve accumulation will be needed in Argentina — this will help the country better absorb shocks and facilitate a timely return to international capital markets”.
“At this point, meeting the year-end reserve target will be challenging, but it is essential that it is achieved within the period envisaged,” the IMF spokesperson said.
Earlier this month, the President said that “the bands are there to put a limit on volatility, so that Argentines wake up in the morning and the exchange rate is not all over the place”.
Milei has said the ultimate goal is for the dollar price to float freely.
Last week, Argentina announced a US$1 billion bond sale, marking its return to the local dollar debt market after more than seven years.
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