Argentina’s consumer price index rose by 2.6% month on month in April.
The result was above the 2.5% forecast.
The April inflation figure, coming in slightly hot at 2.6%, suggests the easy wins in the fight against inflation might be behind us. This miss, while small, is a critical signal that the disinflationary path is not guaranteed to be smooth. We must now adjust our view that the central bank can continue its aggressive policy easing.
We have to remember the context from just last year, when we were looking at monthly inflation rates well above 10% in late 2024 and early 2025. While today’s number is a vast improvement, it indicates a stickiness that could delay a return to true price stability. This persistence puts the government’s entire economic stabilization plan under renewed scrutiny.
This data will likely force the central bank to pause its interest rate-cutting cycle, which has been a primary driver of market performance. Until now, traders have profited from the carry trade, borrowing in dollars to invest in high-yielding pesos. We believe this strategy now carries significantly more risk.
In the coming weeks, we see opportunity in betting against the Argentine Peso. The official 2% monthly crawling peg is now running below the inflation rate, making a future devaluation more likely. We should consider building positions in non-deliverable forwards to profit from a potential catch-up adjustment in the official exchange rate.
Volatility is likely to increase, making options an attractive tool for positioning. Buying puts on the Merval index or on Argentine sovereign bonds could be an effective hedge against market jitters. The market had priced in a perfect landing, and this inflation print shows there may be turbulence ahead.
