Argentina’s Consumer Price Index rose 2.9% month over month in January, up from 2.8% in the prior month.
This small rise suggests inflation pressures are not easing as fast as expected. That makes it harder to argue the central bank can start cutting rates in the second quarter. We should update our view and expect a more hawkish stance in the near term.
Inflation Outlook And Policy Implications
Sticky inflation adds uncertainty. That supports a strategy of buying volatility. Implied volatility on Merval index options has already increased from 32% to 35% in early February, showing the market is pricing in larger swings. Gaining exposure through straddles, or through simple long calls and puts, is a sensible approach.
This inflation data is also likely to put fresh pressure on the Argentine peso. In 2024, we saw how quickly the currency could move during stabilization efforts, and this report may revive devaluation concerns. To hedge—or to position for further weakness—we should consider non-deliverable forwards (NDFs) against the dollar, focusing on one- to three-month tenors.
Rate expectations also need to be reset. The market had been pricing around a 200bp cut by mid-year, but that now looks unlikely. The central bank may keep the policy rate near 40%. In this setup, paying fixed and receiving floating through interest rate swaps becomes more attractive.
For equities, the backdrop is negative. Higher borrowing costs can weigh on corporate earnings. The Merval index rose more than 20% in Q4 2025 on expectations of rate cuts and disinflation. We should now consider buying protective puts on the ARGT ETF or shorting Merval futures to protect against a possible pullback.
Equities And Hedging Considerations
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