Argentina’s Central Bank Intervenes to Halt Peso Slide, Testing Milei’s Grip on 2026 Stability

BUENOS AIRES — The Javier Milei administration is facing a pivotal economic stress test just days into 2026. On Friday, the Central Bank of Argentina (BCRA) began selling dollars to arrest a sharp depreciation of the peso. For market participants tracking the durability of Milei’s presidency, this intervention is a signal moment: the government is now actively defending its currency against a dangerous convergence of debt maturities and a liquidity flood unleashed by the expiration of its tax amnesty program.

This volatility serves as a lead indicator for the administration’s fragility as it enters the second half of its term. Milei’s political capital has been inextricably tied to his success in taming inflation and stabilizing the exchange rate. The current market pressure challenges the government’s ability to maintain that stability without depleting already negative net international reserves—a scenario that would severely compromise his hold on power.

Amnesty Liquidity Hits the Market The immediate trigger for the peso’s weakness is the expiration of the "lock-up" period for the government’s tax amnesty initiative. Under the program, approximately 300,000 depositors declared over $20 billion in assets. To avoid penalties, cash deposits exceeding $100,000 were frozen in special "CERA" bank accounts until January 1, 2026.

As of this week, those restrictions have lifted. The potential for a sudden exodus of these funds—either withdrawn or converted to dollars—has injected significant volatility into the exchange market. The Central Bank’s decision to intervene suggests the administration views a sharp, disorderly devaluation as a political red line it cannot afford to cross.

Shifting Monetary Goalposts Compounding the uncertainty is a tactical shift in the administration's monetary framework. Moving away from its previous fixed devaluation path, the BCRA has implemented a new currency band strategy that adjusts the floor and ceiling based on trailing inflation data.

For January, this results in a 2.5% adjustment pace, pegged to November 2025 inflation figures. While Economy Minister Luis Caputo frames this as a technical alignment to prevent the exchange rate from lagging behind prices, the market interprets the shift as a managed depreciation. If the Central Bank fails to contain the slide within this new band, the resulting inflationary pass-through could undermine the economic narrative that sustains Milei's approval ratings.

The Solvency Question The timing of this currency defense is precarious. The government faces approximately $4.2 billion in foreign currency debt payments in January alone. With net reserves still in negative territory, the administration is walking a tightrope. Minister Caputo has signaled ongoing negotiations for a $7 billion loan from private international banks to bridge the gap, but the financing has not yet been finalized.

For the Milei presidency, the risks are asymmetric. A successful intervention that smooths the transition out of the amnesty lock-up will reinforce his narrative of normalization. However, if the intervention burns through scant reserves without arresting the peso's fall, the administration could face a renewed balance-of-payments crisis—historically the primary catalyst for political upheaval in Argentina.