Itaú BBA - ARGENTINA – Inflation declined in May, in line with expectations

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ARGENTINA – Inflation declined in May, in line with expectations

junio 13, 2019

Lower volatility of the exchange rate and tight monetary policy contributed to a modest disinflation

Lower volatility of the exchange rate and tight monetary policy contributed to a modest disinflation. Consumer prices rose 3.1% mom from April, in line with the latest Bloomberg market consensus forecast and down from 3.4% in April and 4.7% in March. The annualized measure of the last three months consequently decelerated to 55.2% (from 59.5% in April), while the annual reading reached a record high of 57.3%, due to the annual comparison base effect. 

Core item prices also decelerated for a second consecutive month. Core inflation came in at 3.2% mom, down from 3.8% in April and 4.6% in March. On the positive side, the decline in food inflation steepened to 2.4% mom. At the margin, the core reading is running at an annualized 57.6% (last three months), down from 61.9% in April. The last twelve-month inflation reading rose to 58.9%, from 58.0% in the previous month. Regulated prices rose 3.7% mom (up from 3.3% mom in April), led by hikes in gas, water, health service, fuel and cigarette prices. The annual reading therefore hit 61.1%, up from 56% in April. Inflation on items affected by seasonality contributed to the deceleration of the headline figure, with a 0.6% mom price increase for these products, down from 1.6% mom in April. The annual reading decelerated to 39.3%, from 41.9% in the previous month. 

We forecast 40% inflation by December. This estimate implies continued disinflation ahead, driven by sustained exchange rate stability. However, we note that there may be periods of exchange-rate instability as the presidential election approaches, if market participants perceive a negative outcome in October.

Juan Carlos Barboza
Diego Ciongo



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