Central Bank of Argentina publishes President Milei essay rejecting exchange rate pass-through and projecting disinflation by mid-2026

The Central Bank of Argentina published an article by President Javier Gerardo Milei arguing that commonly cited exchange rate “pass-through” narratives are analytically wrong in the wake of the mid-April liberalisation of the foreign exchange market, and that inflation dynamics should be understood primarily through money supply and money demand. The essay frames inflation as “always and everywhere” a monetary phenomenon arising from excess money supply or a fall in money demand, and argues that observed co-movement between the exchange rate and prices is a statistical mirage consistent with the Hume-Cantillon sequence and open-economy models such as Dornbusch overshooting. In this account, excess money supply first pushes up the price of foreign currency as a financial asset, then transmits to tradable goods prices, wholesale and retail prices, and finally wages, with prices converging toward purchasing power parity rather than being causally driven by the exchange rate. Milei also states that Argentina’s monetary policy operates with lags of 18 to 24 months and links this to an expectation that, after a six-month “first phase” of rebuilding the Central Bank’s balance sheet to stop monetary issuance, inflation should be largely resolved by mid-2026, while warning that “money overhang” associated with price and capital controls can prolong the adjustment.