Argentina to sell dollars on parallel market in anti-inflation effort

Argentina's central bank will start selling US dollars in the country's parallel foreign exchange markets to combat inflation and freeze the country's money supply, the government announced on Saturday.

Economy Minister Luis Caputo revealed the new strategy on messaging platform X, stating it would "contribute to deepening the disinflation process."

Starting Monday, when Argentina's central bank issues pesos to buy US dollars on the formal exchange market, it will sell an equivalent amount of dollars on the parallel "CCL" exchange market, Caputo explained.

"There are no more pesos printed in Argentina by any means. It is a historic novelty," Caputo later said in a radio interview. "We were beating inflation by (a few) points and this is the 'knock out' blow," he added.

The announcement follows latest official data showing that a five-month streak of slowing inflation ended in June, with monthly inflation rising higher than in May.

The strategy, outlined by President Javier Milei's government, aims to stabilise the money supply, reduce inflation, and narrow the gap between Argentina's official and parallel exchange rates traded in financial markets.

Since the beginning of the year, Argentina's peso has been sliding in parallel markets, diverging sharply from the official rate due to strict currency controls.

As of Friday's close, the official exchange rate was 919.5 pesos per dollar, while the "CCL" rate was 1,416.2 pesos per dollar. The black market "blue" rate weakened to a historic low of 1,500 pesos per dollar on Friday.

President Milei celebrated the announcement from the sidelines of the Sun Valley Conference, investment bank Allen & Co's annual invitation-only gathering in Sun Valley, Idaho, where he and Caputo are courting investors.

"The monetary base in Argentina is no longer increasing, and this is tremendously powerful news," Milei said during a phone interview with Argentine news channel LN+, adding that the plan would "accelerate the deflation process in the economy."

Since Milei took office late last year, inflation in Argentina has dramatically slowed, decelerating from 25.5 per cent in December to 4.2 per cent in May while June's figure was 4.6 per cent.