As inflation breaks the 2% psychological mark, the government explains how it will accumulate reserves without losing control of the money supply

ARGENTINA - In Brief 13 Jun 2025 by Joaquin Cottani

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This week ended on two positive notes. Yesterday, INDEC reported that May inflation was 1.5% m/m, down from 3.7% in March and 2.8% in April. The low print benefited from a reduction (-2.7%) in seasonal prices and underadjustment (1.3%) of regulated prices. However, although core inflation (2.2%) was higher than the headline number, it was significantly lower than in  April (3.2%). This is very good news for the government ahead of the midterm election, provided the result can be repeated in the next four months. Also, on Tuesday, BCRA, in coordination with MECON, announced a series of measures that the authorities claim will facilitate the accumulation of foreign reserves without jeopardizing the tight control they want to keep on the money supply. This is also good news because it shows that, contrary to previous official statements, the government is as concerned about reserve accumulation as we and the market do. Here is a summary of what the government announced.  1. Policies to facilitate reserve accumulation BCRA reaffirmed its intention not to buy dollars inside the exchange rate band, in consistency with the policy of letting the peso float within band limits. To acquire the dollars it needs to service external debt, the National Treasury will resort to three mechanisms currently at its disposal: 1) Borrow dollars directly by extending the repo with international banks; 2) Issue peso bonds subscribed in dollars (similar to the Bonte 30 the Treasury sold recently for $1 billion at 25.9% annual yield); 3) Buy, with pesos from its own account at BCRA, dollars borrowed by private companies or provincial governments. The first and second mechanisms have no impact on...