Argentina’s Consumer Price Index for December rose by 2.8% compared to the previous month. This increase was higher than the expected 2.5%. The monthly rise shows that inflation is still a big issue in the country’s economy. This jump in consumer prices highlights the difficulties in controlling inflation. A higher inflation rate can reduce how much households can buy and affect the overall economy.

Inflationary Pressures

It’s important to watch price levels closely because changing inflation rates can influence different sectors. The rise in the Consumer Price Index may lead to changes in economic policy in the future. The unexpected inflation rate for December 2025 indicates that price pressures are not easing as hoped. The Banco Central de la República Argentina (BCRA) may adopt a tougher monetary policy soon. Given the rate hikes in 2025, an increase in the LELIQ rate before the first quarter ends seems likely. This situation puts pressure on the Argentine Peso, leading to predictions of its depreciation against the U.S. dollar. In previous inflation surprises in 2025, the USD/ARS pair experienced sharp rises, especially after the central bank’s substantial devaluation that brought the official rate above 1500. We’re considering buying USD/ARS call options or taking long positions on futures contracts that mature in one to two months.

Investment Strategies

With a likely central bank rate hike on the horizon, short positions on local government bonds look promising. As interest rates go up, existing bond prices tend to drop. We can express this by shorting Argentine bond futures or using interest rate swaps to pay a fixed rate while receiving a floating rate. For the Merval stock index, the outlook is more cautious. Although the index increased by over 200% in local currency during 2025, it remained flat in dollar terms. Tighter monetary policy may negatively impact corporate earnings. Therefore, we might want to buy put options on the Merval index or key Argentine ADRs to protect against a possible market decline. Lastly, this inflation surprise adds to overall market uncertainty. Implied volatility for both currency and equity options is likely to rise from the relatively low levels at the start of January 2026. This makes long volatility strategies, such as purchasing straddles on the USD/ARS, a smart choice for profiting from possible significant price changes in either direction. Create your live VT Markets account and start trading now.

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