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February inflation set for release

INDEC’s central headquarters in downtown Buenos Aires.

INDEC will today publish its federal CPI, likely close to January’s

The INDEC national statistics bureau will today post February’s inflation, which is expected to clock in near the 3.7 percent seen in January, the first month that reflected the institution’s long awaited IMF-friendly methodological reform and a sharp turn toward credibility.

Although sectors of the opposition remain hesitant as to whether credible numbers will be published regularly, over the last week most consultants and economists have forecast a similar rate for last month as January’s rate, and also agreed that inflation will drop significantly in March onward due to a bundle of measures orchestrated by Central Bank Governor Juan Carlos Fábrega, who has also set the explicit objective of printing less money in 2014.

Among the factors that affected the CPI throughout February were the lingering effects of January’s sudden devaluation and the private sector’s traditional start-of-the-year price adjustments.

Almost all experts forecast that inflation will decelerate in the next few months as result of the ongoing contraction of pesos in circulation due to the Central Bank’s hike on interest rates, which catalyzed their absorption into fixed-rate deposits, among other credit schemes.

The cooling down of inflation is unlikely to last very long, however, unless the government follows through with its vow to reduce public spending and allocate subsidies more pragmatically this year, which seemingly remains postponed until the least politically costly way to do so is deciphered.

Federal Planning Minister Julio De Vido and Economy Minister Axel Kicillof have resurfaced the plan to cut public utilities subsidies, particularly from higher income sectors, but there has been no specificity regarding when or how this would begin to unfold.

On the more immediate horizon, the wage hikes that will take effect in the next few months will apply further strain on prices.

Teachers’ unions, which continue to strike, have been demanding hikes of 30 percent, which will likely be taken on as a floor for negotiations by organized labour sectors in their negotiations. With inflation for the first two months of the year expected to weigh in around eight percent, the government will strive to assure that prices will not go up at such high rates for the whole year.

Today’s report from INDEC will inevitably reflect the effect of the peso’s depreciation against the dollar on prices.

“A 20 percent increase in the dollar’s value may end up in a 0.7 to two percent increase in the final price of the product — which will be seen on the shelves,” warned Chinese-run supermarket chamber head Miguel Calvete shortly after the sudden explosion of devaluation in January.

On Friday, Trade Secretary Augusto Costa was seemingly getting ready for the government to unveil a high inflation rate by noting that “February’s (Consumer Price) Index will cover all increases, some of which were unjustified.”

Private calculations

For the opposition, which jointly publishes its Congress CPI as an average of private consultancies unwilling to release rates themselves, prices surged 4.3 percent in February, a slightly more conservative figure than the 4.6 put forth for January.

Yesterday, former Socialist lawmaker Héctor Polino’s Consumidores Libres reported a 2.76 percent overall hike in the prices of the prices of the 38 food products it surveys every month, accumulating to a 10.81 percent rise on the year.

The consultancy reported that the 19 products of those 38 that are part of the government-sponsored Price Watch scheme did not register any changes at Coto or Plaza Vea, although they did at small local shops not included in the price-watch agreement.

The prices that increased the most during the first fortnight of the month were oranges, which went up 6.9 percent per kilogram, bananas, by 6.11 percent and butternut squash, by 4.61 percent.

The only product that was cheaper was empanada dough, which dropped 0.21 percent.

Herald with DyN, Télam

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