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the repressed prices that can put in check the promise of Luis Caputo


The Minister of Economy, Luis Caputorecently assured that February inflation will be closer to 10% “than 20%,” which would confirm the path of deceleration of price dynamics. This is also validated by the main consulting firms in the City and some analysts, who maintain that, although the trend is going in that direction, certain risks could make the anti-inflationary strategy falter and, by domino effect, that of Government.

The consultants estimate that inflation of the second month of the year will be between 14% and 17%, “although the Government has not yet finished with the strongest adjustments“, the downward trend in price dynamics seems to be a fact, but it is not the end of the road for the head of the economic team, but Quite the opposite: it is the starting point of your program.

Inflation for February: what the consultants say

The price collection carried out by C&T Economic Advisors reveals a notable impact of the adjustments in public transportation, prepaid bills and expenses. Regarding the food and beverage category, after significant moderation throughout Januaryan increase in activity is observed, highlighting the dynamism in drinks during the first week and in food, during the second. Preliminarily, “it is estimated that the inflation rate for the month could be around 14%.”

Meanwhile, the Freedom and Progress Foundation It projects that inflation will reach 17.4% in February. Excluding regulated items, “the Consumer Price Index (CPI) is expected to At the national level it is around 15% monthly“.

“Regulated items saw an increase in January, reaching 26.6%, compared to 20.7% recorded in December. The market has anticipated the slowdown in inflation since mid-January, when high-frequency indicators began to be published below expectations. Currently, They estimate around 15% for February and 10% for March“, maintains, for her part, Paula Gándara, from Adcap Financial Group.

Obstacles to disinflation: the factors that complicate it

For Camilo Tiscornia, from C&T, there are two key factors that will impact inflation in the coming months. First of all, “regulated prices, especially in Greater Buenos Aires (GBA), as in the case of buses and electricity”, which will continue to increase, and that “will contribute significantly to inflation“. This phenomenon is due to the need to adjust rates that have not yet experienced increases, “such as electricity and gas,” adds the economist.

Secondly, outside of the regulated ones, for Tiscornia, the evolution of the dollar will be key, as it is a determining factor for general inflation. Government “intends to maintain more gradual control over the rise of the official dollar and the futures markets seem to support this perspective,” he warns. However, he indicates that there is uncertainty about whether this policy will remain unchanged, “since an eventual jump in the dollar could put a stop to the slowdown in inflation,” he concludes.

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Along the same lines, he explains Sebastian Menescaldieconomist EcoGo, that, the incidence of increases in regulated prices, although preliminary, “presents challenges for economic disinflation.” And, given the lack of information about future increases in services such as gas and water, as well as the implementation of the basket of subsidies in April, are points that generate uncertainty.

For the economist, these increases complicate the slowdown in inflation by generating inertia and affecting the speed of the process. Although these increases “should not abort the disinflationary strategy, could slow it down, delaying reaching the single-digit objective until the second half of the year“says Menescaldi.

It should also be taken into account that the indexing of formulas and Methodological issues can also influence the perception of inflation. However, Menescaldi maintains that “the real concern lies in the risk that the fiscal and Central Bank measures do not work, which could lead to an eventual devaluation“, in line with what was expressed by Tiscornia.

Inflation: the basis of Caputo’s strategy

As well explained Damian Di Pace, director of Focus Market, today “the Government is managing to control three or four very important variables.” First, he mentions the surplus of pesos in the market. “It is absorbing them strongly with the placement of bonds like BOPREAL, which in the last tenders was very successful“.

Second, the improvement of the balance of the remunerated liabilities of the Central Bank and. Third, “there is not as much devaluation expectation as there was a month and a half ago,” adds Di Pace, taking into account that the future dollar to April it fell 29% in the projection of a discrete jump in the official wholesale exchange rate.

Di Pace maintains that the drop in activity caused the variation in the price level in February to fall sharply. Now, in line with the other experts consulted, “comes the part of increases in regulated prices of the economy: electricity, gas, water and private”.

For Di Pace, in this last stage, we must see how this fine tuning of reducing national subsidies and adjusting the relative prices of the economy does not end up leading to higher inflation than we have been projecting. But, in summary, in a context of falling demand for pesos, such as February and March, seasonally they are the months with the greatest fall.





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