The national government strengthens its economic strategy in the face of the risk of a slowdown in disinflation.

The July inflation figure provided a double reading: while the headline index rose to 1.9%, the core index —which excludes regulated and seasonal prices—remained at a moderate 1.5%. The impact of the 14% exchange rate jump during the month was virtually unaffected by prices, something the government considers a step forward in its stabilization policy.

However, the latest figure marked the second consecutive increase in the monthly CPI, following the low of 1.5% reached in May . In June, it had added just 0.1 percentage points, and now it has increased by another 0.3. The economic team aims to prevent the slowdown of the disinflation process that began in the middle of last year and consolidated in the first months of 2025.

Projections for August predict a renewed surge, driven by the rise in fuel prices associated with the exchange rate and markups on consumer goods. Although the month has just crossed its halfway point, consulting firms estimate the floor will be 2% . Such a figure would raise alarm bells, as well-known firms warn that inflation is unlikely to fall below that level in September and even October , which could erode the positive expectations of investors and companies and lead to further preemptive price adjustments.

To cushion the effects of the dollar's rise—which closed July at $1.380—the government implemented an aggressive monetary policy: liquidity contraction, interest rate hikes, and a drop in the official exchange rate to $1.325 at yesterday's close, marking its ninth consecutive day of decline . The goal is to minimize the impact on prices and maintain exchange rate stability until the legislative elections.

Within this framework, the Treasury yesterday approved rates close to 70% per year to renew the short-term Lecap (Lecuadorian Monetary Policy). It also announced a new tender to absorb monetary surpluses . Economy Minister Luis Caputo justified the strategy by the need to address the so-called "Kuka risk." Market distrust in the possibility of a return to Kirchnerism, which in the past has caused a sharp macroeconomic deterioration.

The official bet is that "greed will triumph over fear," as then-Central Bank head Mario Blejer said in 2002. This is when high-yield investments in pesos were encouraged to discourage pressure on the dollar. However, if these extraordinary rates continue, they could impact economic activity. For example, by making credit more expensive, increasing delinquency rates, and increasing business costs, which are passed on to prices.

Finally, they would imply accelerated growth in local currency debt if real yields continue to exceed them by more than 40 percentage points.