Argentina: CPI Continues its Upward Trend

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Figure 1: Argentina CPI (%, y/y)

Source: INDEC

Argentine statistics institute (INDEC) has released inflation data for March. Unsurprisingly, inflation has continued its upward trend reaching 104.2% (y/y) by growing 7.9% (m/m) during March. Food inflation, which affects mainly the poorest have registered a 9.6% increase (m/m) and it is also operating above the three digits’ mark at 109%. Core inflation has registered a 7.2% (m/m) pushed up by the rises of good and services.

The rising inflation challenges the feasibility of the “Fair Prices” measures (here). According to the measure a set of enterprises have committed to restrict the rise of a set of basket at 4%. However, the government goal has been proven too optimistic as enterprise costs have been higher than the plan target, a likely scenario is that several enterprises abandon the program which could mean an end of the measure. This happens in the same week that the BCAR will meet to decide their policy interest rate which is at the moment at 78%, and pressure from the IMF to put the interest rate at clear positive terrain.

The situation becomes even more serious due to the prospect of severe droughts affecting the 2023 harvest, which ultimately will affect the supply of food merchandise and diminish grain exports. Additionally, the BCAR have restarted the monetary emissions to finance the Treasury as the IMF deal will allow up to 0.6% of the GDP in 2023 on net emission, which add fuels to the inflation fire. We believe Argentina inflation will continue to register inflation numbers close to the 100% mark in the coming months and the most likely scenario is that the government gives in on their “Fair Price Measure” as the maintenance of the program increases the risk of shortages.