Argentina to sell dollars on parallel market as part of anti-inflation drive
Recasts with focus on dollar selling in paragraph 1, adds new detail on plain and quotes throughout
BUENOS AIRES, July 13 (Reuters) -Argentina's central bank will start selling U.S. dollars in the country's parallel foreign exchange markets in an effort to combat inflation and freeze the country's money supply, the government said on Saturday.
Economy Minister Luis Caputo announced the new strategy onmessaging platform X on Saturday, saying it would "contribute to deepening the disinflation process."
Starting Monday, when Argentina's central bank issues pesos to buy U.S. dollars on the formal exchange market, the bank will effectively balance Argentina's monetary base by selling an equivalent amount of dollars on the parallel "CCL" exchange market, Caputo said.
"There are no more pesos printed in Argentina by any means. It is a historic novelty," Caputo later said in a radio interview. "We were beating inflation by (a few) points and this is the 'knock out' blow," the minister added.
The announcement comes after official data published on Friday showed a five-month streak of slowing inflation ended in June when monthly inflation came in higher than in May .
The strategy outlined by the government of President Javier Milei aims to stabilize the money supply, bring down inflation and help close the widening gap between Argentina's official and parallel exchange rates traded in financial markets.
The South American country's peso has been sliding since the beginning of the year in parallel markets, which for years has diverged sharply from the official rate due to strict currency controls.
At Friday's close, the official exchange rate traded at 919.5 pesos per dollar, while the so-called "CCL" rate traded at 1,416.2 pesos per dollar. Meanwhile, the widely-used black market "blue" rate weakened to a historic low of 1,500 pesos per dollar on Friday.
President Milei celebrated Saturday's announcement from the sidelines of the Sun Valley Conference, investment bank Allen & Co's annual invitation-only gathering in Sun Valley, Idaho, where the president and Caputo are courting investors.
"The monetary base in Argentina is no longer increasing, and this is tremendously powerful news," Milei said during a phone interview with Argentine news channel LN+, adding that the plan would "accelerate the deflation process in the economy."
Since Milei took power late last year, inflation has slowed dramatically in Argentina, decelerating from 25.5% in December to 4.2% in May. June's figure was 4.6%.
Reporting by Jorge Otaola; Writing by Brendan O'Boyle; Editing by Daniel Wallis, Diane Craft and Nick Zieminski
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