Poverty levels in Latin America's third-biggest economy are at 40 percent and the country is battling annual inflation exceeding 200 percent after decades of financial mismanagement. AFP

Argentina's monthly inflation slowed slightly in January, but the prices of key goods and services rose 254 percent year-on-year, the statistics agency said Wednesday.

President Javier Milei had warned that the country's battle with inflation was far from over when he took office in December, riding a wave of fury over decades of economic mismanagement, and stood by his policies Wednesday.

"If one takes the number alone, isolated, it is horrifying. And indeed it is, but you have to look at where we were and what the trend was," Milei told television station La Nacion Mas.

Monthly inflation stood at 20.6 percent in January, the INDEC statistics agency said, down from the 25.5 percent figure for December.

Annual inflation in December was 211 percent.

Latin America's third-largest economy continues to face an unrelenting crisis, with Milei warning that the situation will get worse before it improves as he applies what he termed "shock" treatment.

He began his term by devaluing the peso by more than 50 percent, slashing transport and fuel subsidies, and getting rid of price controls.

The cost of transport went up 26.3 percent in January, while goods and services soared 44.4 percent.

The president Wednesday said that "economic activity would have fallen much more" had he not implemented the new policies.

"We are focusing on taking care of the most vulnerable class," Milei said, while detailing increases in social allowances.

Milei has estimated that inflation would come under control within two years.

The 53-year-old libertarian and self-described "anarcho-capitalist" is however struggling to get his reforms through Congress, where his fledgling party does not have a majority.

After marathon debates, his hefty flagship reform package -- which touches on many areas of public and private life, from privatizations to cultural issues, the penal code, divorce and the status of football clubs -- was recently sent back to committee for a rewrite.

But in a symbol of support for Milei's reforms, the IMF in late January issued a fresh disbursement of $4.7 billion in funds, as part of a previously agreed $44 billion aid program.

International Monetary Fund chief Kristalina Georgieva at the time praised Milei government's "bold actions to restore macroeconomic stability and... address long-standing impediments to growth."

The Organization for Economic Cooperation and Development (OECD) said last week it expects Argentina's economy to shrink by 2.3 percent this year.