October inflation: another month of slowdown is expected, but will it pierce the key 3% level?

The Government’s sights are set on inflation in order to be able to lift the exchange rateaccording to the president Javier Milei in USA. This is one of his campaign promises – as well as the elimination of price increases – and a long-standing market demand. In this scenario, the main consulting firms are already beginning to project inflation for October, even though the month has not yet closed.

One of the keys to October inflation was, without a doubt, the gas rate reduction due to the summer season, and that of fuel, around 1%, which helped decompress the total variation.

The inflation pierced the key level of 4% in September (+3.5%), something that could not be broken since May when it was located in 4.2%. In the following months it accelerated and decelerated in a saw-like trend: June (+4.6%), July (+4%), and August (+4.2%).

Inflation for October: does it break 3% or not?

He latest Market Expectations Survey (REM) which publishes the Central Bank (BCRA) projected that inflation will remain around 3.4% for October. The new REM will be known in the first days of November, but several consulting firms have already begun to provide projections: the most optimistic expect the figure to be almost a 2.5%while those who estimate a figure closer to the REM, expect it to be close to the 3.3%.

The lowest measurement corresponds to the consulting firm Orlando J. Ferrereswhich estimated that inflation would be positioned at 2.6% in October. This data would confirm the trend towards deceleration shown by the consumer price index (CPI) from the ninth month of the year.

According to what the consultant commented, Food inflation in the first three weeks “traveled” to 1.7%the current week and the next week still remain to be measured. In addition, they highlighted that the drop in gas rates made the regulated and the general ones “stick together” much more. Until now they were decoupled, since those regulated in September gave 4.1% and the general one was 0.6 percentage points (pp) below, in 3.5%.

For its part, from the consultancy C&Twhich measures prices in Greater Buenos Aires, observe a moderation in the CPI in October, between 2.8% and 3%. Maria Castiglionichief economist of the advisory company, highlighted the drop in the gas rate, which helped relieve pressure on the general variation.

“The moderation of other services, which continue to rise more than inflation but at a decreasing rate, has been playing an important role. Core inflation, the most relevant, also shows signs of decline; What’s more, in the current week there has been a drop in prices, not just a slower rate of increase, which is explained by reductions in some toiletries, some beverages and baked goods,” Castiglioni launched.

Inflation: when will it pierce 2% monthly?

From EcoGothe consulting firm that usually comes closest to inflation measured by the National Institute of Statistics and Censuses (INDEC)they projected that inflation would be close to 3%, although the last week of the month still remains to be surveyed.

“For now we do not see it drilling 2%, at least for the remainder of 2024, although we expect it to be around 2% and 3% between now and the end of the year”he assured.

It should be noted that the REM expects that the inflation is positioned around the 3.6% for the end of the year, with a slight rebound due to the seasonality of the year-end holidays, and would only reach the 3% in March 2024.

Analytics predicted that the price variation will be in the 3.3% in Octoberthanks to the slowdown in food and beverages, as well as those regulated by lower rates.

Exit of the exchange rate

The President assured that “the opening of the stocks is closer” and that there are two possibilities to open the economy: with and without money. ““If they give me the money, I’ll open it today.”launched the president. However, he assured that the Government works as if they did not get the money: “To open the stocks without money you need the excess supply of pesos to disappear”, he noted in radio statements.

The Government advances in talks with different multilateral credit organizations aimed at obtaining external support that could exceed US$20 billionas far as he could know Scope. For the next two years it has already achieved a total of u$s8,800 million, within the framework of the tour of the Minister of Economy, Luis Caputo, through the United States to participate in the Annual Meetings of the International Monetary Fund (IMF) and the World Bank.

Regarding inflation, Milei pointed out that “when the CPI is 2.5%, we are already in induced inflation. There, under the ‘crawling peg’ and if there is no ‘money hoverhang’ – monetary surplus – the stocks”. “When that is going to happen does not depend only on us, it depends more on the money demand decisions of individuals,” he catapulted.