Argentina is taking a bold step to combat inflation by selling US dollars on the parallel foreign exchange market. The central bank will start buying dollars on the official market and selling an equivalent amount on the parallel “CCL” exchange market starting Monday. This move is intended to freeze the money supply, bring down inflation, and narrow the gap between the official and parallel exchange rates.
President Javier Milei views this as a “knock out blow” against inflation, which has slowed in recent months but rose again in June. The strategy, implemented alongside other economic reforms, aims to accelerate deflation and stabilize the Argentine peso.
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The move comes as Argentina grapples with a long history of economic instability and high inflation. The widening gap between the official and parallel exchange rates has further complicated the situation, undermining confidence in the peso and creating uncertainty in the financial markets.
The government believes that by controlling the money supply and intervening in the parallel market, they can stabilize the value of the peso and ultimately bring inflation under control. While the success of this unprecedented measure remains to be seen, it represents a significant shift in the government’s approach to tackling Argentina’s longstanding economic challenges.