Argentina Cuts Peso Devaluation Rate to 1%

Argentina's President Javier Milei has implemented a significant shift in economic policy by reducing the peso's crawling peg from a 2% to a 1% monthly devaluation, effective February 2025. This decision follows a notable decrease in annual inflation, which dropped from a staggering 211.4% in 2023 to 117.8% in 2024, with December inflation recorded at 2.7%. Analysts have expressed concern that the peso's real appreciation could hinder the rebuilding of Argentina's foreign currency reserves, while Milei defends his strategy as essential for maintaining macroeconomic stability. The Central Bank justified the change by citing a downward trend in inflation and a recovery in economic activity. Despite this cautious approach, there are warnings from economists that previous instances of rapid currency appreciation have led to economic crises in Argentina. As Milei prepares for upcoming mid-term elections, his administration is focused on balancing inflation control with the currency's competitiveness.