Investors expect Argentina's currency to come under increasing pressure weeks after new President Javier Milei devalued it by 54%, a sign that markets weren’t impressed after his initial actions.

As Milei's economic team recently met with International Monetary Fund officials to restart the country's $44 billion program, the peso keeps weakening in a parallel market traditionally used to circumvent currency controls. The new low hit on Thursday and raised the risk of further inflation, which was expected to exceed 200% last month. Argentina’s inflation rate reached 211% in 2023, the fastest growth rate in 30 years. The IMF predicts Argentina's economy will contract by 2.5% in 2024.

On a month-on-month basis, prices rose an average of 25.5% in December, compared to a 12.8% increase in November. The reading was the worst since 1991, when Argentina was emerging from a hyperinflationary spiral.

Argentina's routinely high inflation is largely due to previous governments' reliance on printing money to finance spending, a practice that Milei opposed during the election campaign. But price pressures intensified in December, when Milei devalued the artificially inflated official peso exchange rate by 54% and allowed price-fixing agreements to expire. Both moves particularly affected food prices.

Economists said the monthly figure for December is likely to be close to the peak of Argentina's current inflationary crisis, and the growing recession is likely to slow further growth.

On top of that, Argentines' purchasing power fell by about 10% on average in December as wages rose more slowly than prices. Meanwhile, a regular survey of retailers conducted by Argentina's Federation of Medium-sized Businesses showed a 13.7% drop in sales in December compared to the same month in 2022.