Itaú BBA - ARGENTINA - Inflation rises by less than expected

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ARGENTINA - Inflation rises by less than expected

August 10, 2017

Core inflation came in above the headline reading for the second consecutive time.

National inflation accelerated in July, but less than expected. Consumer prices gained 1.7% between June and July, up from 1.2% in the previous month but below the 2.1% increase pointed by private surveys. Year-to-date, prices increased 13.8%. In the so-called greater Buenos Aires area prices rose 1.7% mom in July (1.4% in June) bringing annual inflation to 21.5%, slightly lower than in June (21.9%). 

Core inflation came in above the headline reading, both at the national level and in Buenos Aires, for the second consecutive time. At the national level core inflation reached 1.8%, similar to that in the greater Buenos Aires area. As a result, three-month accumulated inflation reached 20.9% (annualized) at the national level and 21.6% in Buenos Aires, from 22.4% and 23.9%, respectively. 

Scheduled adjustments in regulated prices in November and the recent exchange rate depreciation pose challenges for inflation ahead. We see inflation at 22% by the end of this year, far above the 17% upper bound of this year’s target. In this context, the central bank will likely stay put in the upcoming monetary policy decisions and rate cuts are likely only once (and if) the political uncertainty diminishes.  

Juan Carlos Barboza
Diego Ciongo


 

 



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