“The drag of the month of December is thus combined with a change in the composition of the basket of prices regulated by the government, which after the end of the Care Prices program,” said the consultant.
Another fact to take into account is the survey provided by Free Consumers. According to the survey carried out by the entity in supermarkets and neighborhood businesses in the city of Buenos Aires, the price of the 21 products of the so-called “basic food basket” had an increase of 1.84% only during the 1st fortnight of the month of January of the year 2022, which confirms that the inflationary trend continues to rise.
What are the factors involved?
1. Foreign exchange market
The parallel dollar accumulated a rise of $13 from its monthly minimum, noted last Monday, January 3, while in the week it registered a rise of $9.50, the most important in 7 months. In the official market, the Central Bank also begins to accelerate the rate of devaluation. Last week, the dollar advanced 50 cents, below the previous week’s adjustment. Although this “dropper” devaluation was already announced by the agency at the beginning of the year, the truth is that the advance of the exchange rate continues to be below inflation. According to the REM, the expected variation in the nominal exchange rate is 60% by 2022.
2. Rate increases
As for rates, the announced 20% rise will be well below inflation, and although it had initially been announced that it would be during the first two months, there was still no definition after the first hearings. In addition, Alberto Fernández spoke of the importance of “ordering public accounts” as one of the many aspects of what he considers to be “multi-causal inflation”. Based on what has been said so far, the impact on bills would be 35% on residential rates.
3. Core inflation
In the last 15 months, core inflation, which does not take into account seasonal or regulated prices, has not fallen below 3%. According to the latest Survey of Market Expectations (REM), projected inflation will reach 54.8%. What is the Core CPI? This index prepared by INDEC allows monitoring the evolution of prices without taking into account the volatility of those goods and services that exhibit seasonal behavior (seasonal) or whose prices are subject to state regulation or have a high tax component (regulated).
Those who participate in the REM estimated that core inflation would have been 3.6% per month during December 2021, the same value forecast in the previous survey. Monthly forecasts were generally raised compared to the previous REM. The average of the expected variations in the next six months (January/May 2022) is 3.8% per month.
4. Monetary issue
In the last week of December, the Central Bank made the last draft of 2021 and closed a December with record issuance. The entity led by Miguel Pesce transferred $203,184 million to the Treasury and rounded up shipments of $685.00 million during the last month of the year, a figure that is equivalent to 1.5% of GDP. The accumulated issuance thus closed 2021 at 2.12 trillion without computing the SDRs. With this new turn, monetary financing closed at a maximum in recent history.
As is known, the monetary factor is one of the main engines of inflation. With a fiscal deficit that is still high -despite the cut of 3 points compared to 2020, according to official data-, the injection of pesos into the economy without support will also continue in 2022, even with a more complicated scenario: the field will provide less foreign currency than in 2021 due to weather conditions and there are no longer SDRs granted by the International Monetary Fund (IMF). Although during 2021 most of the economic variables were trodden and inflation still reached 51%, a similar or higher figure is expected for 2022, mainly because the State must try to cut subsidies and lower the deficit upon request. of the Monetary Fund in the framework of the negotiations.
Source From: Ambito
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