One of the economists most listened to by Javier Milei revealed the key to bringing inflation to 1%

After the data of iinflation of 2.7% in Decemberthe Central Bank (BCRA) announced that, starting in February, it will reduce the monthly devaluation rate of the official dollar and it will go from 2% to 1%. The decision had already been anticipated by Javier Milei, who indicated that he would adopt this measure if the price increase in the last month of 2024 was comparable to that registered in November. In this context, economists are already sharpening their pencil to calculate what may happen in the month of January.

Even after the publication of the CPI, the Government, through the Central Bank of the Argentine Republic (BCRA), fulfilled another of its promises: it reduced the devaluation of the official exchange rate to 1% per month.

Given this measure, Juan Carlos de Pabloa renowned economist, was consulted about the key factor that contributed to the slowdown in prices. According to his experience, “what 2024 has shown is the power of fiscal balance. It had to be put into practice. You had to have the balls to do what Milei did,” in reference to the economic decisions of the Executive.

The economist highlighted that fiscal balance will be the engine that will sustain and drive the Government in 2025, considering it an essential factor to continue the slowdown in inflation. “The confidence that the Government has is not numerical. It is the determination that the president and his economic team have shown with fiscal balance,” he commented.

De Pablo’s warnings

However, De Pablo has not yet specified what the variation in prices will be during this year, although he made it clear that compliance with the fiscal balance will be strict: “What is going to happen in terms of the inflation rate is a byproduct of that. This is fought day by day“he noted.

Regarding the Central Bank’s decision to reduce the crawling peg, De Pablo expressed his disagreement, describing the coincidence with the publication of the December CPI as a “regrettable coincidence.” In his opinion, this measure does not constitute a formal commitment, but only an opinion. “We are not with the Martínez de Hoz board or in the era of convertibility, where the BCRA committed to selling dollars at the official exchange rate,” he indicated.

Furthermore, he explained that if necessary, the Government could change that decision “without asking anyone’s permission,” since, according to him, they are actually being told “not to make decisions about a devaluation jump.” Finally, De Pablo stressed that the Government faces a crucial technical dilemma: “If you are going to increase the official exchange rate to 1% and you have a single interest rate, by what criteria do you set it? Based on inflation or devaluation? You have a conflict there,” he concluded.

Will it be able to drill 2%? Projected inflation

Ricardo Delgado, director of the consulting firm Analytica, referred to the inflationary slowdown and ventured to answer when the Consumer Price Index (CPI) could register a figure with a “1” at the beginning.

“If you compare annual inflation, you see that it closes at around half the level of 2023, which represents an important achievement,” highlighted Ricardo Delgado when referring to the inflation data for December.

In an interview with CNN Radio, Delgado related the decision of the Central Bank to reduce the monthly devaluation of the peso with the Government’s objective of bringing the Consumer Price Index (CPI) below 2%. “Hence the decision to lower the crawling peg from 2% to 1%, with the purpose of overcoming the challenge of breaking this 2% monthly threshold, which is increasingly complicated,” he explained.

Regarding the evolution of prices in the coming months, the economist was optimistic and estimated when the objective set by the Casa Rosada could be achieved.

“The initial indicators for January, especially in the food and beverage sector, reflect a slight acceleration. It is unlikely to close with inflation below 2%. SHowever, it is possible that in February or March an index that begins with 1 will be recorded,” he said.