December 15, 2017
Friday, June 16, 2017

Experts: inflation has reached a tipping-point

Estimates and indicators from state organisations and private consultancies monitored by the Central Bank suggest that deflation took hold in May and will continue into June.
By Santiago Del Carril
Herald Staff

Analysts are confident that consumer prices will fall dramatically

The Let’s Change (Cambiemos) administration may have finally reached a tipping-point in their battle against double-digit inflation; with economists and financial consultancies predicting June’s inflation will be no more than one percent, continuing a downward trend.

The INDEC national statistics bureau’s new numbers renewed optimism amongst financial consultancies and government officials last week after it reported May’s inflation to be 1.3 percent — half April’s amount.

Many analysts had been caught by surprise by the latest statistics since it came on the back of three months of inflation averaging 2.5 percent.

Despite the apparent deceleration, President Mauricio Macri’s government is still far from fulfilling its goal of 17 percent inflation for 2017. The accumulation of the first five months of this year already is 10.5 percent, based on INDEC’s data, meaning that the average monthly rate would have to be less than 0.9 percent for the remaining six months of the year in order for the government’s targets to be met.

The latest WEO World Economic Perspectives report released in last May also confirms that the Central Bank’s 17-percent inflation cap will not be fulfilled and that it will end up being 21.6 percent for 2016. The International Monetary Fund (IMF) predicts inflation will only begin to fall below 20 percent in 2018.

Improving scenario

“We will probably see one percent this month. Following this rhythm we will have 15 percent annual inflation by 2018 ... Which means on June 20 inflation should be lower than the country’s economic growth,” said economist Miguel Bein, former presidential candidate Daniel Scioli’s economic advisor, in an interview with La Nación daily.

Despite the improving scenario, the Central Bank decided on Tuesday to maintain interest rates at 26.25 percent to ensure that deceleration continues. The monetary authorities stressed they would continue to monitor the evolution of prices and would implement an interest rate policy that consolidates the deflation process.

“The Central Bank will continue with its clear anti-inflation policy, in order to continue with the policy of deflation and obtain its objective of 12-17 percent in 2017,” the Central Bank stated in a press release this week.

Estimates and indicators from state organisations and private consultancies monitored by the Central Bank suggest that the deflation that took hold in May will continue into June.

According to the Banco Ciudad (City Bank) report, price increases will be half the level of 2016, and the lowest in the past eight years.

And so far, prices seem to be falling in line with these estimates. In the first two weeks of June, retail price increases fell, states a report by the Economía & Regiones financial consultancy.

“The early results from June show (for now) that inflation will fall more this month and probably are close to one percent this month,” the consultancy stated.

Much of this drop is attributed to those products or services that are regulated. The Banco Ciudad report highlights that the major difference between the inflation data in May combined with the last three months between February and April are based on products with regulated prices such as utilities, water, gas and electricity.

However a few economists predicted that there would be a few more spikes in inflation this year. Analytica financial consultancy’s economist Rodrigo Álvarez believed that the increases in inflation would come in October.

“The 17 percent goal won’t be fulfilled because of utility rate increases. There is a very restrictive monetary policy being carried out by the Central Bank to fulfil an ambitious goal,” said Álvarez in an interview with Radio Cultura.

On the other hand, economist Fausto Spotorno of Ferreres y Asociados financial consultancy believed a hike inflation would occur in July. “The July increase (1.5 percent) will be because of the time of year — winter vacation, payment of half-year bonuses and more consumption — then it will fall,” he said.

Regional inflation comparison

Argentina continues to have the second-highest inflation in the region. Venezuela is in first place; the IMF estimates that it will have over 720 percent inflation in 2017. However Argentina is still far from the inflation rates of its neighbours in the Mercosur region. In May Brazil registered 0.31 percent inflation, with only 1.42 percent accumulated in the first five months of 2017, reported the Brazilian State Institute of Geography and Statistics (IBGE). Chile’s inflation rate was even lower with an 0.1 percent increase for May.

Uruguay reported a 0.13 percent inflation rate, and for 2017 an accumulated 4.2 percent inflation rate increase, and Paraguay registered a 0.3 percent inflation rate with a total 2.2 percent increase in the first five months of 2017.



  • Increase font size Decrease font sizeSize
  • Email article
  • Print
  • Share
    1. Vote
    2. Not interesting Little interesting Interesting Very interesting Indispensable

  • Increase font size Decrease font size
  • mail
  • Print

    ámbito financiero    Docsalud    

Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia