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Argentina’s Central Bank to Index FX Bands to Inflation, Start $10–17 Billion Reserve Buys Jan. 1

The shift is meant to reinforce disinflation by linking the band to INDEC inflation to channel monetary expansion through reserve accumulation.

Overview

  • From January 1, the floor and ceiling of the exchange-rate band will update monthly by the latest INDEC CPI with a two‑month lag (T‑2), replacing the prior 1% monthly crawl.
  • The preannounced reserve‑accumulation plan targets about US$10 billion in 2026 in the base case, rising to US$17 billion if money demand increases by 1% of GDP, subject to balance‑of‑payments flows.
  • Daily execution will initially be limited to 5% of FX market turnover, with the option of off‑market block purchases to avoid distortions in pricing and liquidity.
  • The remonetization path envisions the monetary base rising from 4.2% to 4.8% of GDP by December 2026, with liquidity managed via Lecaps operations, repos, and gradual reserve‑requirement normalization to maintain positive real rates.
  • Financial quotes turned higher after the announcement, with MEP and CCL climbing, the blue dollar advancing, and hard‑currency sovereign bonds gaining.