“What the data for April shows is a high inflationary inertia, derived from a core inflation higher than that of March, 6.7%. This indicates that inflation is quite difficult for it to slow down sharply in the coming months.”, he explained to Ambit the economist Jorge Neyro, and added: “There is already an increase in tariffs, in regulated prices, and food is not slowing down (they continue around 6% per month), with which May inflation would not be below 5%”.
In this scenario, the analyst argued that “In December we could have inflation close to 75%, due to the high inertia and the need to keep both the exchange rate and interest rates competitive”. “And all of this helps, in some way, to keep inflation high,” he remarked.
As analyzed by LCG, “it is possible that by May the monthly inflation does not subside substantially”. The survey of a food basket carried out by the firm reflects an increase of 5.6% compared to the same week in April, which “would contribute 1.4 points of inflation.”
“The punctual increases in Fuels, prepaid, cable and internet telephony, CNG, domestic employees, expenses and private schoolscould contribute approximately another additional 1.7 points of inflation for May”, they added from LCG.
Thus, as highlighted by the consultant, for this year it is expected that inflation “is above 70% annual in December”. “This is due to higher international inflation, added to the local effects of lifting nominal anchors that contained price dynamics: the devaluation of the official exchange rate continues to accelerate and it is expected that the rate freeze will be lifted soonwhich will have first and second round impacts”, they remarked.
Meanwhile, as analyzed by the ACM consultancy, “It is to be expected that inflation in May and June will continue to be at a high level.” “Regarding the year-on-year variation, it is expected that it will exceed 60% in the coming months,” they assured.
For its part, from EcoGo, they made a first projection 5% for May, based on the survey of retail prices carried out by the consultant. “Goods are scarce, their replacement uncertain and there is no horizon beyond the day to day, with which any price is feasible and validated by a demand driven by the search for coverage,” the firm said in its latest weekly report. In that framework, it is expected that the “floor” of inflation for this year will be 70%.
For Martín Burgos, an economist at the Cultural Center for Cooperation (CCC), inflation “could slow down in the coming months, because the impact of the war was far away”. “But it depends a lot on the policies carried out by the Government,” he said and, when analyzing whether the rate hike could result in a slowdown, he remarked: “No, because it is not an issue that has to do with the exchange rate or with the amount of money. It is an external shock. The rise in rates could raise financial costs and, therefore, be transferred to the price”.
Inflation: the Government’s challenges
With this scenario, containing the rise in prices is one of the main urgencies facing the Government. In this regard, Martín Calveira, a researcher at the IAE Business School, analyzed: “A double challenge is posed for economic management given the unwanted contractionary bias implied by managing inflation stabilization and, even more complex, influencing expectations”.
“The biggest problem pressing issue that economic management currently has is inflation. Not only because of its sustainability, but because of the immediate and second-round effects that are observed in an economy with chronic inflation,” the analyst remarked.
“The immediate effect is an adjustment in the purchasing power of income, mainly from wage earners and more intensely from those in the informal sector. While the effects of second instance are related to new price adjustments as a result of increased costs and, as occurs in our country, effects of the increase in monetary financing of the public sector’s operating deficit that generates an excess of monetary balances”, added Calveira.
Source: Ambito
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