According to the latest report of the LCG consultancy, Key factors such as “price control through exchange rate anchoring, the economic recession and the fiscal balance that marks a regime change” were essential to achieve this inflationary slowdown. The result was an annual close almost 100 percentage points below that recorded in 2023.
In this scenario, the paper on inflation highlights two factors that could worry Javier Milei due to the risk of a new rise in the CPI this year.
The two elements that could reactivate inflation
According to the analysis, January began with “smaller increases in regulated prices, but a more significant increase in seasonal goods.” This leads LCG to project monthly inflation of around 2.5%, a figure they consider to be the floor.
Despite this apparent stabilitythe report points out two risks that could interrupt the downward trend. The first is the exchange delay. “Reducing the crawling peg to 1% could be an effective tool to align price expectations, if it were not for the fact that the current exchange rate shows a significant delay,” they warn.
“In this scenario, effectiveness could be compromised due to uncertainty around the evolution of the dollar. The BCRA’s recent interventions in the CCL and MEP markets reflect this situation and could be a factor that delays a new adjustment in rates,” they point out.
Furthermore, they highlighted the importance of monitor the end of the recession. “Although the reduction of inflation to current levels represents the main achievement of the ruling party, we consider that there is still a long way to go,” warns the consulting firm’s report.
According to the analysisthe transition towards a low inflation regime “will be completed once the discipline imposed by the recession disappears”. In this context, the dispute over income distribution is expected to intensify, especially in a framework where relative prices are already balanced.
“We project a inflation of 33% annually by December 2025 (with an annual average of 40%), exceeding the 18% estimated in the Budget project,” they indicate. “Our scenario considers a partial correction of the exchange rate delay towards the end of the year and an increase in the distributive bid, even with a growth moderate economic situation,” the report concludes.
Source: Ambito
