Argentina inflation hits 14-month low in August

The easing price trend matters because taming inflation was the cornerstone of Milei’s political mandate and the main justification for his aggressive austerity program, currency and fiscal tightening, and sweeping deregulation. For investors, it supports the case that Argentina remains on a disinflation path, which can help stabilize local assets, improve real returns and reduce the risk premium on sovereign and corporate credit.

But the same policy mix that has brought inflation down is increasingly unpopular. Milei’s popularity has slipped as unemployment becomes voters’ top concern, factory output weakens and more than 240,000 formal private-sector jobs disappear under his watch. Industry groups say the president’s rapid dismantling of protectionist barriers has left manufacturers exposed to foreign competition, while nearly 30,000 companies have closed in the past three years.

The central bank has already trimmed its 2026 growth forecast to 2.1% from 2.7%, well below the government’s 5% budget target, underscoring the tension between price stability and activity. That split is what investors are watching now: if inflation keeps falling without a further collapse in output, Milei gains room to argue that his program is working; if growth keeps sliding, the political payoff of lower inflation may prove harder to sustain.

For markets, the next tests are whether inflation keeps decelerating into the final quarter and whether the government can show enough momentum in output and employment to preserve support for its reform agenda.