Milei’s Chainsaw Policy Is Showing Results: Argentina’s Inflation Falls to 1.7 Percent

Javier Milei’s economic program was highly controversial from the outset. Trade unions organized a general strike against his austerity and reform policies just weeks after he took office; Peronists, left-wing groups and other civil society organizations took to the streets. During later protests against cuts to universities, even conservative politicians and representatives of private universities joined the demonstrations. There were widespread fears that Milei’s shock therapy could trigger severe social disruption without permanently solving Argentina’s decades-old economic problems.

Nearly three years later, however, one development can no longer be overlooked, at least when it comes to his most important short-term objective: inflation has fallen dramatically. In December 2023, consumer prices rose by 25.5 percent within a single month. By August 2026, the monthly rate had fallen to 1.7 percent. Argentina has also recorded primary budget surpluses for two consecutive years, ended direct monetary financing of government spending and returned to strong economic growth in 2025. The International Monetary Fund now speaks of significant progress in stabilizing the economy.

An inflation turnaround that is hard to ignore

A 25.5 percent increase in prices in a single month: that was how 2023 ended in Argentina. Over the year as a whole, consumer prices had risen by more than 200 percent. Supermarkets were changing prices almost daily, the peso was rapidly losing purchasing power, and economists warned of the risk of hyperinflation.

In August 2026, the national statistics office INDEC reported a monthly inflation rate of 1.7 percent. That is not yet price stability by European standards, since a monthly inflation rate cannot be compared directly with the annual rates commonly cited in Europe. But compared with the double-digit monthly rates seen when Milei took office, the difference is enormous.

The IMF now also explicitly assesses the stabilization positively. In July, IMF Managing Director Kristalina Georgieva described the development as an “impressive stabilization,” pointing to falling inflation, two consecutive primary surpluses, declining poverty, rebuilt foreign-exchange reserves and lower government financing costs.

That is significant because stabilization was at the heart of Milei’s economic policy promises.

The government is no longer permanently spending more than it takes in

A substantial part of the explanation can indeed be found where Milei located it from the beginning: in the public finances.

In 2025, Argentina’s central government recorded a primary surplus for the second consecutive year. It amounted to around 1.4 percent of gross domestic product. Even after interest payments, the government still posted an overall financial surplus of approximately 0.2 percent of GDP.

The IMF has described the speed and scale of this fiscal consolidation as exceptional. Within one month of the change of government, the fiscal stance was tightened by around five percentage points of GDP. According to the Fund, this step was central to restoring economic stability and credibility.

This changed a mechanism that had fuelled Argentina’s inflation problem for years.

Large fiscal deficits had repeatedly been financed, directly or indirectly, by the central bank. Under Milei, this monetary financing of government spending was brought to an end. The IMF now explicitly cites both the fiscal anchor and the end of monetary financing as central pillars of Argentina’s stabilization program.

The simplified explanation currently circulating on social media — first balance the budget, then inflation falls — therefore has a genuine economic basis.

It just does not tell the whole story.

The path downward began with a sharp move upward

The often-cited fall from 25.5 percent monthly inflation in December 2023 to 1.7 percent in August 2026 looks spectacular. And it is. Yet Milei’s stabilization program initially pushed inflation in the opposite direction.

In November 2023, the last full month before he took office, monthly inflation had still been 12.8 percent. In December, it jumped to 25.5 percent — almost double.

A significant reason was Milei’s first reform measures themselves. Just days after taking office, the new government sharply devalued the officially overvalued peso while simultaneously beginning to adjust previously distorted prices and subsidies. The International Monetary Fund explicitly attributes much of the December inflation surge to this major exchange-rate adjustment.

The 25.5 percent figure therefore was not simply an unchanged crisis level inherited from the previous government. Milei took over an economy already suffering from extreme inflation — and initially accepted additional price pressure in order to correct exchange-rate and price distortions.

Only then did the actual disinflation begin.

By April 2024, the monthly rate had already fallen to 8.8 percent. The IMF later attributed the faster-than-expected decline to a combination of fiscal stabilization, weaker demand and a more limited pass-through from the peso devaluation to prices.

That is why the 12.8 percent figure belongs alongside 25.5 and 1.7 percent. Together, the three numbers tell a much fuller story than a simple comparison between starting and finishing points.

Milei’s government did not merely reduce an existing inflation rate of 25.5 percent. It first chose an abrupt correction that accelerated inflation sharply — and then brought it down over more than two and a half years to a fraction of that peak.

Austerity alone did not bring inflation down

Economically, it would also be too simplistic to attribute the decline entirely to the government budget.

The IMF identifies several factors: tight fiscal policy, restrictive monetary conditions, trade liberalization and changes to the monetary and exchange-rate regime. The initially tightly managed peso also helped stabilize inflation expectations.

This combination matters.

If the government no longer needs to finance deficits through newly created money, one major source of inflationary pressure disappears. Restrictive monetary policy further limits liquidity. A more stable exchange rate, in turn, reduces pressure on import prices.

Milei’s success in reducing inflation can therefore clearly be linked to his economic policy agenda — but not to a single measure.

The first phase came at a high price

The transformation was anything but painless.

Milei’s government cut subsidies, halted public construction projects, reduced government employment and lowered real public spending. Economic output contracted by 1.3 percent in 2024. Construction and industry were among the sectors hit particularly hard by the abrupt adjustment.

Poverty also rose dramatically at first. In the first half of 2024, according to INDEC, 52.9 percent of people living in the surveyed urban areas were below the poverty line. This development became one of the strongest arguments used by critics of Milei’s policies.

These figures matter because they show that bringing inflation down was not a cost-free experiment.

But they do not tell the whole story either.

The economy returned to growth in 2025

The recession was followed by a clear recovery.

Argentina’s gross domestic product grew by 4.4 percent in 2025. Agriculture, mining and financial services were among the main drivers of growth. Private consumption, investment and exports also increased again.

Poverty also fell after its previous sharp rise. In the first half of 2026, the latest INDEC figures showed that 32.3 percent of people were living in poverty. That remains very high — but it is around 20 percentage points below the peak reached in the first half of 2024.

This makes any assessment of Milei’s first phase of economic policy more complicated.

The social costs of the initial shock were real.

But it is equally real that several indicators that deteriorated dramatically at first subsequently improved substantially.

Even the IMF now speaks of fundamental progress

What is striking, therefore, is how the international assessment has changed as well.

In May 2026, the IMF noted a sharp decline in inflation, the fiscal primary surplus and substantial progress in the transition toward a more market-oriented economic system. At the same time, its Executive Board explicitly praised the government’s consistent adherence to the fiscal anchor.

In July, IMF Managing Director Georgieva went further. Two consecutive primary surpluses had been achieved for the first time in 15 years, poverty had fallen sharply, creditworthiness had improved and more than 45 billion dollars in major investments had already been approved under Argentina’s new investment regime.

That does not mean the IMF considers Milei’s entire program complete or free of risk.

The Fund continues to call for greater exchange-rate flexibility, the accumulation of adequate foreign-exchange reserves, targeted social assistance and further reforms. Economic stabilization therefore still has to prove durable.

2026 is a reminder that the work is not finished

The latest economic data also call for caution.

The unemployment rate stood at 7.9 percent in the second quarter of 2026. Industrial production fell by five percent year on year in July, while the monthly economic activity indicator declined by a seasonally adjusted 2.9 percent compared with June.

This does not contradict the inflation turnaround.

Rather, it shows that lower inflation and strong economic growth do not necessarily occur at the same time.

The IMF still expects real economic growth for 2026 overall and considers stabilization to be well advanced. At the same time, it continues to stress existing vulnerabilities and the need to strengthen growth and employment alongside disinflation.

Milei’s most important promise has produced measurable results

After nearly three years, it is therefore possible to draw an interim conclusion without turning it into a political verdict.

Argentina was in an extreme inflation crisis at the end of 2023. Milei promised a radical break with previous economic and fiscal policy and did, in fact, implement an exceptionally rapid fiscal adjustment.

Today, the record includes two consecutive primary surpluses, the end of monetary financing of government spending and a monthly inflation rate of 1.7 percent. After the recession of 2024, the economy returned to 4.4 percent growth in 2025, while the poverty rate, after initially soaring, has fallen significantly.

This does not mean that every element of Milei’s policies has worked or that Argentina has solved its structural problems.

But it is equally difficult now to describe the development as merely an economic experiment without measurable results.

The 1.7 percent inflation rate recorded in August may be the most visible symbol of that change.

The decisive test comes next: Can Argentina preserve the stability it has achieved and turn it into lasting investment, growth, rising incomes and employment?