The Argentine central bank announced on Monday that it will allow the peso to fluctuate more freely in response to investor demands for President Javier Milei's government to correct the overvalued currency. The Milei administration will now permit the peso to trade within a band with upper and lower limits, rather than adopting a free-floating exchange rate like the U.S. and other countries.

The central bank stated that starting next year, the new policy will allow the band to widen at the pace of monthly inflation, which stood at 2.5% in November. Currently, the band expands at a monthly rate of 1%.

In a statement, the bank also revealed plans to boost foreign exchange reserves, potentially increasing them by $10 billion to $17 billion next year.

The International Monetary Fund welcomed the Argentine central bank's new monetary policy and its efforts to rebuild reserves. The IMF has provided Argentina with tens of billions of dollars in bailout funds.