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Despite the very high level, the Government speaks of a path of deceleration

February 14, 2024 – 20:50

In Economics they admit the impact of devaluation and price liberalization. But they assure that the fiscal and monetary shock (not to mention its recessionary impact), added to the exchange rate anchor, guarantee a drop in inflation in the coming months despite the tariffs.

20.6% of inflation from January reported this Wednesday by the National Institute of Statistics and Censuses (INDEC) confirmed that the cost of living continues to travel to record levels for more than three decades. And just in the two months in which he had to manage Javier Milei accumulated a jump of 51.35%. But in the Ministry of Economy They decided to spread a optimistic look: they ensure that the index of prices last month’s consumer price index (CPI) confirms that a “deceleration path”.

Luis Caputo and its officials link the current price dynamics to a “monetary overflow” inherited from the previous administration, although they admit that among the triggers for the inflationary spike were the megadevaluation December, carried out days after the inauguration of the current government, the sharp rise in fuel prices and the elimination of price agreementsparticularly those for mass consumption.

However, they value two issues positively. On the one hand, 20.6% was below the median of the projections collected by the Central Bank in its Market Expectations Survey for December (in which 25% was expected) and January (21.9% ). On the other hand, they highlight that there is a “path of deceleration in nominal value that has been observed since mid-December”, something predictable after the initial post-devaluation flash.

Inflation: what do they say in the Government?

The reading they make in the official offices is that the transfer to exchange rate jump prices December was “much lower” than what occurred after the devaluation after the STEP that the International Monetary Fund imposed on the previous economic team. They highlight that at that time the rise in the real exchange rate liquefied “in less than two months” and that now the official dollar rose 129% while inflation accumulated just over 51% in the same period.

What do they attribute it to? To the strong shock fiscal adjustmentto the drastic monetary contraction from the liquefaction of the pesos of the economy through the lowering of interest rates and the policy of 2% crawling peg monthly implemented since the devaluation. What they avoid mentioning is the main anchor that this strategy generates: the recessive anchormaterialized in the collapse of salaries, the fall in consumption and the stoppage of production.

“The combination of fiscal, monetary and exchange anchor, and the normalization of foreign trade ensure a decreasing inflationary trajectory,” they say. And they highlight that the January data included a “high statistical carryover from December.” Caputo predicts that in February the CPI would break through the 20% monthly floor and that it would drop another step in March. Although There are consultants who qualify the possibility of a constant slowdowngiven the increases already applied and announced in transport and energy rates, and doubts about how exchange rate administration will continue.

Meanwhile, year-on-year inflation accelerated last month to 254.2%. And the liquefaction is advancing at a steady pace: the purchasing power of salaries and pensions is approaching the floor marked after the 2021 crisis and the emergence of convertibility.

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