Argentina inflation slows to 1.9%, Milei targets central bank reform

Argentina’s monthly inflation rate fell to 1.9% in June, marking the third consecutive month of slowing price growth and the first reading below 2% this year. The figure, published by the National Institute of Statistics and Censuses (INDEC), met private analyst expectations and dropped from 2.1% in May. Core inflation, which strips out volatile and regulated prices, came in at 1.6%.

For market participants, the broader significance lies in the government's structural response to this progress. Economy Minister Luis Caputo noted the ten-month low, but the critical development is a pending legislative package. The administration plans to send Congress a bill prohibiting the Central Bank from financing the Treasury through money creation, complete with penalties for non-compliance. This would amend the bank's charter to make preserving the currency's value its sole mandate, overturning a 2012 reform that added employment and development to its objectives.

Despite the steady disinflation since Javier Milei took office in December 2023—when annual inflation peaked at 211%—the government has effectively conceded that its formal targets are out of reach. An annual projection of 10.1% embedded in the 2026 budget is mathematically unattainable following a first-half cumulative rate of 16.8%. Officials have also abandoned their stated goal of hitting a monthly rate "starting with a zero" in August.

Year-on-year prices are still rising at a 33.5% pace, imposing severe constraints on the broader economy. A typical family required 1.53 million pesos in June to stay above the poverty line, an increase of 35.7% from a year ago. Research from the National University of San Martín indicates that recent employment gains have largely been confined to the informal sector or require workers to log additional hours just to maintain purchasing power.

Price pressures in June were led by recreation and culture, up 4.2% on the back of tourism packages, and housing and utilities, which rose 3.3% following rate adjustments. Food and beverage prices increased by 1.3%, sitting below the national average. Analysts expect the disinflationary trend to persist, though lingering sectoral pressures and eroding household incomes will remain central challenges as the government looks toward the 2027 election cycle.