The dollar soared in July, but inflation remained low: the phenomenon that the economic team is closely monitoring.
In July, the official dollar saw its biggest jump since the December devaluation: a 14% rise that took the market by surprise . However, retail inflation remained contained, with figures ranging between 1.7% and 2%, according to private estimates. This unexpected decoupling offers a respite for the Javier Milei government, which is seeking to consolidate its stabilization program.
The phenomenon breaks, at least for now, the classic link between exchange rate and inflation. The consulting firm C&T recorded a 1.9% increase for Greater Buenos Aires, which reduced year-on-year inflation from 38.8% to 35.5%.
For Camilo Tiscornia , director of C&T, this "anomaly" is explained by a fiscal and monetary adjustment that limits the room for maneuver for companies: " Prices are no longer automatically adjusted by the dollar, but rather respond to the reality of the market, where there is no room for sharp increases without losing sales ."
Rocío Bisang , an economist at EcoGo, agrees: "Low wages on the demand side, and increased competition from import liberalization, force a leveling down. This limits pass-through."
Regarding inflation, the pass-through to prices remains low for now. The downside has been the dollarization process, which has intensified. The exchange rate rose 1.8% last week and has accumulated a 7.1% increase since June 24. pic.twitter.com/ToKHg1JmG5
— @EcoGo Consultores (@EcoGoConsultor1) July 23, 2025
From LCG, Melisa Sala stated that "core inflation has not yet incorporated the exchange rate jump," and that many companies prefer to cut margins rather than pass the increase on to prices. The index estimated by the consulting firm is also around 1.8% for July.
Although July offered a respite, August is shaping up to be a key month to assess whether this divorce between the dollar and inflation was temporary or if it heralds a new dynamic. Claudio Caprarulo , director of Analytica, explained that margin compression has so far kept inflation at bay, but warned: " If the dollar continues to rise and demand doesn't pick up, that pressure could build ."
Tiscornia also sounded a warning: " Exchange rate volatility could reactivate the pass-through. August is usually calm, but if the tension continues, prices could reflect this ."
Bisang, meanwhile, emphasized that the outlook is still uncertain: " Everything will depend on how the situation develops. If expectations weaken, disinflation could pause ."
Lorenzo Sigaut Gravina of Equilibra estimated inflation at 2% for July, but anticipated that the impact on prices could be felt in August. Eugenio Marí of the Fundación Libertad y Progreso also urged caution: "Although the CPI fell back below 2%, the rise in the exchange rate reflects pressures that, if not corrected, will be felt in other variables."
For Javier Milei's economic team, the July inflation figure can be interpreted as a tactical victory amid the effort to maintain the fiscal anchor. However, no one in the government considers the battle against prices to be over. The market is closely watching what will happen in August, when the dollar effect begins to be felt in an economy still in recession.
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