The government lowers rates and confronts banks to sustain its economic plan after the defeat in Buenos Aires.

The government of Javier Milei faces a new key confrontation with the market at a time of extreme political tension following the electoral defeat in the province of Buenos Aires. With more than $7.25 trillion in peso-denominated debt maturing, the Ministry of Finance and the Central Bank will seek this Wednesday to ensure a full rollover to prevent excess pesos from exerting pressure on the dollar.

The economic team, led by Luis Caputo , has already made it clear that it is not willing to give ground. The strategy combines a gradual reduction in interest rates , maintaining bank reserve requirements unchanged, and a bond portfolio maturing after the national elections in October. The confrontation with the banks will be decisive in confirming that the financial program remains on track.

The tender will offer three Lecaps (October, November, and January), a Tamar adjusted by the wholesale fixed-term rate, a Boncer for March, and two instruments pegged to the exchange rate for those seeking coverage against exchange rate volatility. The signal is clear: the Treasury is seeking to absorb as much financing as possible without generating uncertainty in the foreign exchange market.

Private analysts warn that the key will be achieving 100% rollover . This was guaranteed in previous auctions thanks to the level of reserve requirements and the intervention of the Central Bank. If this isn't achieved, the Treasury could absorb surpluses with its passive swap position, as happened in early September.

The Central Bank surprised everyone by approving a 5 percentage point reduction in the liquidity rate , which went from 45% to 40%. The measure aims to loosen the cost of credit in pesos and, at the same time, mark a downward trend in the benchmark for the entire economy.

" It's a good measure that seeks to normalize the macroeconomic landscape and prevent real rates from strangling activity . They will most likely continue to fall between now and November, because current levels are not sustainable," said Nicolás Cappella of the IEB Group.

The second day of trading after the Buenos Aires elections was marked by a central political event: the explicit support of the International Monetary Fund , which calmed the markets with a forceful statement. " We support Argentina's commitment to ensuring the sustainability of the exchange rate and monetary framework , along with fiscal discipline and the deregulation agenda," said spokesperson Julie Kozack .

President Javier Milei echoed the message and reaffirmed that there will be no changes to the economic roadmap: fiscal balance, exchange rate bands, and deregulation . The political gesture was interpreted as a direct signal to dispel investor doubts about a possible relaxation of the program.

Meanwhile, Kirchnerism is trying to capitalize on the ruling party's defeat in Buenos Aires with alarmist rhetoric about the economic situation. However, the reality is that the core problem remains the legacy of years of populism , with a peso-denominated debt market inflated by Kirchnerist mismanagement and a financial system accustomed to exorbitant rates as a survival mechanism.

The Libertarian government's goal is to put the financial situation in order without giving in to the banks' blackmail . With the support of the IMF and Milei's political decision not to budge "one millimeter" from the program, this Wednesday's showdown will be a gauge of the economic path toward October.