The inflation month of August became the highest in 32 years and triggered the projections for what may happen in the last part of the year. In fact, Different consulting firms already estimate that the CPI will rise again in double digits in September and they do not rule out similar levels for October and November.
The elevated inertia puts a high floor on this month’s data, while a possible defrosting of prices after the elections, added to a potential new devaluation of the official dollar and the fiscal impact that the latest measures implemented by the Governmentare some of the factors that, analysts say, will continue to push inflation upwards in the final months of the year.
In this framework, according to the Market Expectations Survey (REM) of the BCRA, The analysts consulted estimated inflation of 12% for Septemberwhile they raised the 169.3% year-on-year the data for the entire year: that is, 28.6 pp above the previous survey. In this framework, they predicted a variation in the CPI of 9.1% in October, 9.4% in November and 13.2% in December. Figures that, if some of the scenarios predicted by analysts are confirmed, may be even higher.
“The weekly data from the C&T price survey reveal that in August prices had a strong acceleration in the second fortnight, which leaves a very high statistical drag for September. This means that, despite a certain moderation so far in September, The month aims to close again with double-digit inflation”, they projected from C&T.
Meanwhile, from LCG they indicated that it is to be expected that the transfer to the price of the devaluation “has not ended and a certain delay will still be seen in September.” “For now, in the LCG Price Survey, weekly food inflation only slowed down at the margin and remains high, at levels of 1.8% weekly,” the firm detailed, although they added: “The freezing of the dollar official at $350, the increase in the reference rate to 118% TNA, the suspension of public service rate adjustments and the extension of agreements and freezes to a larger number of products, could be giving results, but “It will be a short-term effect.”.
In that sense, when projecting what may happen in the coming months, they warned: “After the elections, the Government will have to move forward with a ‘defrost’ and that will have an impact on prices. We estimate that currently around 40% of the CPI basket has repressed prices in some sense. With inertia that still implies records below double digits, the reversal of the measure will add 10 pp of inflation in December. On top of this, the effect of unfreezing the Official Dollar set at $350 will be added. It is still not clear how it will be implemented, but one would think that, sooner rather than later, it will try to recover (at a minimum) immediate post-PASO competitiveness.”
Projections beyond September
Eugenio Marí, Chief Economist of the Libertad y Progreso Foundation, analyzed before Ámbito that the firm projects that for October and November “Inflation remains close to double digits per month”. “But everything is subject to high uncertainty. If the Central Bank carries out another jump in the official exchange rate, we will see another rise in the price of tradables as happened in August, and a CPI that will accelerate,” he noted.
“At the same time, the value of the peso will depend critically on how the demand for money evolves. The more the demand for pesos falls, the less room there will be to finance the deficit with monetary issuance. Which brings us to the latest measures taken by the Government to lower taxes, which will essentially lead to financing the fiscal gap with greater issuance and greater indebtedness from the Central Bank,” added the analyst.
Marí also highlighted the impact that a “defrosting”: “All this occurs in a framework where there is inflation under the carpet. Various prices in the economy are controlled and delayed, such as the exchange rate or tariffs. And the remunerated debt of the BCRA, which today has a rate higher than 200%, puts pressure on future monetary issuance and consequently on future inflation as well.”
In this context, Francisco Ritorto, economist at ACM, assured: “August sets a floor for the remainder of the year, “October is going to be exacerbated by the uncertainty of the electoral process and in the following months it will remain to be seen what the transition stage that will occur after the elections will be like.”
“There are several risks that pose greater inflationary pressure“Another devaluation jump after the elections has not yet been ruled out and the latest measures implemented by the Government, with the fiscal impact they entail, pose additional risks,” analyzed Ritorto, who in that sense concluded: “In September we expect inflation similar to that of August, and in the following months a greater acceleration.”
Source: Ambito
