Argentine President Javier Milei made a significant announcement on Friday regarding a forthcoming change in the country's monetary policy framework, following a successful legislative victory that secured his landmark economic reforms. In an interview with TV station LN+, Milei revealed that a revamp of the monetary regime is on the horizon, aiming to stabilize the ample monetary base to prevent fluctuations. This move comes after Milei's package of reforms was passed by Congress in the early hours of Friday morning, demonstrating his ability to lead with a minority in a challenging legislative environment.
Under Milei's presidency, the central bank has undertaken an assertive monetary easing campaign, reducing the benchmark interest rate from 133% to 40%. The International Monetary Fund had hinted earlier in the month that changes to the exchange rate policy were on the horizon, with the current policy of a 2% monthly devaluation rate being criticized for its lack of competitiveness against inflation levels. Milei stressed the importance of a flexible exchange rate policy to enhance the country's export competitiveness.
Regarding foreign reserves, Milei expressed satisfaction with the central bank's current pace of accumulation but mentioned that the government could afford to lose up to $4 billion in reserves. However, the strengthening peso in recent months has slowed down the campaign to rebuild foreign reserves, with the central bank recording a decrease in dollar purchases in June after months of significant accumulation. Milei's administration is now navigating the balance between stabilizing the monetary system, ensuring exchange rate competitiveness, and managing foreign reserves effectively in the volatile economic climate.