Argentina inflation cools as growth recovery stalls

Economist Esteban Domecq said the country has already passed through a first phase of shock containment, followed by a cyclical rebound, and is now in a more fragile stage where activity has stalled, credit remains tight and political noise is rising. He argued that Milei’s team has made clear gains on inflation, bringing monthly price increases down from 3.4% in March to 1.7% in August, but warned that the economy is still not remonetizing in a meaningful way.

That tension sits at the center of the policy debate. Domecq said short-term inflation remains complicated by inertia, indexation and regulated prices, even if the long-term driver is monetary discipline. He added that Argentina’s mix of higher interest rates, a recently appreciated peso and tighter liquidity has helped anchor prices, but has also squeezed parts of the domestic economy.

The exchange rate is now one of the biggest swing factors. Domecq said the peso has moved sharply higher in real terms after elections, supported by a rare current-account surplus, record agricultural output, energy development and favorable external prices. He said there is little room for further appreciation and expects the dollar to regain some lost ground, which would be healthier for activity but could also add some inflationary noise in the months ahead.

That trade-off matters for investors because it goes straight to sovereign risk, local credit demand and equity valuations. BBAR and LOMA, two Argentine U.S.-listed names, have both come under pressure in recent sessions, with BBAR closing at $12.54 on Oct. 19, below its 50-day and 200-day moving averages, while LOMA finished at $9.90, also beneath its 200-day average. The moves underscore how sensitive Argentine assets remain to any sign that disinflation is slowing or that the peso is slipping.

Still, Domecq’s core message was that the long arc of policy discipline can eventually work. If Argentina “does its homework” with fiscal order and monetary prudence, he said, inflation should converge toward single digits over time, though not in a quick or linear way. He argued that international experience suggests the process can take years, not quarters, and that the real test now is whether Milei can sustain the adjustment long enough for prices to stabilize without choking off the recovery.

The next catalysts are straightforward: more inflation data, signs of peso stability, and whether the government can loosen financial conditions without undoing the gains already made.