President Milei: Floor the accelerator with what you say

Miguel Braun · Aug 13 2025 · 4 min read

President Javier Milei has firmly defended a clear stance: inflation is "always and everywhere a monetary phenomenon", caused by an excess in the money supply or a drop in peso demand, and not by a rise in the dollar. He argues this in an article published by the Central Bank of the Argentine Republic (BCRA), where he criticizes local economists for confusing correlation with causation when attributing inflation to the exchange rate.

However, the actions of the economic team and the Treasury seem to contradict this view, obsessively focusing on preventing the dollar from rising, which raises an inconsistency between the president's discourse and the policies implemented. This contradiction not only generates confusion, but also perpetuates a model that restrains economic reactivation and access to credit, essential for growth and retaining young talent in Argentina.

The contradiction between discourse and action:

The report published on the BCRA's website and written by Milei argues that the dollar "pass-through" to prices is a myth and that inflation originates in monetary imbalances, not in exchange rate increases. If this is true, why does the economic team deploy an arsenal of measures to keep the dollar under control? From the Treasury and the BCRA, actions have been implemented such as:

• Maintaining high rates after dismantling LEFIs: Instead of allowing a natural decline in interest rates after LEFI maturities injected liquidity, the BCRA again absorbed liquidity through passive repos, setting rates above the secondary market and also increasing reserve requirements.

• Treasury emergency auctions: The Ministry of Economy has placed peso securities such as LECAPs, validating rates above the secondary market to absorb pesos and prevent pressure on the dollar.

• Intervention in dollar futures: The BCRA has spent significant resources (between USD 3.5 and 5 billion) to intervene in the futures market, seeking to stabilize the exchange rate.

These measures suggest that, despite Milei's discourse, the economic team acts as if a dollar rise were a direct threat to inflation, contradicting the presidential narrative. If the president is convinced that the dollar does not generate inflation, why don't they let the exchange rate float freely within the currency band established in the economic program, intervening only if it reaches the ceiling? Premature intervention and the effort to absorb pesos at any cost reflect a lack of coherence that confuses markets and society.

Comparison with peer countries: Interest rates and country risk

To contextualize the impact of these policies, let's compare interest rates in local currency and country risk of Argentina with its Latin American peers. Argentina leads the interest rate ranking with an exorbitant rate (+50%) more than three times higher than Brazil (15%), the second country with the highest rate, and far above Chile (4.75%) and Peru (4.50%), which maintain low rates thanks to stable economies. Argentine country risk (near 700 bps) is disproportionately high, reflecting a perception of instability that doesn't compare to Uruguay or Chile (near 100 bps).

These differences show that Argentina faces a restrictive monetary environment and a risk perception that discourages investment and credit. How can we ask the world to trust us when not even we trust our own government or currency, which explains the very high interest rates in local currency.

The cost of obsession with the dollar:

The economic team's obsession with containing the dollar not only contradicts Milei's discourse, but also has severe economic cost. Maintaining high interest rates and absorbing liquidity limits access to credit, suffocating companies that need financing to grow. The lack of credit also impacts young people, many of whom choose to emigrate in search of better opportunities, perpetuating the talent drain.

Instead of prioritizing exchange rate stability at any price, the government should return the absorbed pesos to the system and allow a rate reduction, as happens in countries like Chile and Peru. If the dollar rises, let it be contained at the ceiling of the currency band, not before. This would align the economic team's actions with Milei's vision, fostering an environment where credit flows, companies grow and young people find reasons to stay.

Conclusion

President Milei, your ideas about inflation as a monetary phenomenon are clear and, for many of us, very convincing. However, your economic team's actions do not reflect that conviction. The constant intervention to prevent the dollar from rising, the very high interest rates and the absorption of liquidity contradict the discourse that a rise in the dollar does not generate inflation.

Argentina cannot continue trapped in its obsession with the dollar and inflation, forgetting that cutting rates is fundamental to reactivate the economy. It is time to align policies with your vision: return these pesos already issued to the market, cut rates and let the dollar float within the band. Only this way will we boost growth, retain the youth and build a prosperous future.

We know monetary policy has a lag of up to 24 months and that we are still dealing with the aftermath of the disastrous previous administration. We Argentines who support you won't stop doing so over a transitory inflation spike. You said it clearly: "I don't care about the political cost, I came to do what must be done".

If you want the country to overcome its obsession with the dollar, the economic team must lead by example: stop intervening in dollar futures, release liquidity and allow rates to fall so credit flows. Only this way will companies grow, entrepreneurs prosper, and young people find reasons to stay.

President, your commitment to economic freedom is what inspired us to vote for you and made you a global phenomenon. Please do not stray from that out of fear of a transitory rise in the dollar or inflation.

Mr. President: floor the accelerator with what you say!