Stagflation by design? Milei’s monetary strategy and its costs

ARGENTINA - Report 02 Nov 2026 by Joaquin Cottani

The Milei government has tried to break inflationary inertia by simultaneously controlling the nominal exchange rate and the money supply. To do so, it has relied on three heterodox tools: the cepo (exchange controls), the provision of exchange-rate hedges, and the sterilization of reserve purchases. Despite these efforts, the authorities have not yet managed to bring inflation permanently below 2% per month. The ensuing real appreciation is delaying economic progress. Changing the course of monetary and exchange rate policy is possible, but Mr. Milei is resisting it. Here, we explain why he is wrong.

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