Consumer prices increased 1.05% from February to March (1.0% a year earlier), leading the annual rate to tick up 6bps to 13.34%. The March print was slightly above the market consensus and our call of 0.99%. Housing and Utilities (+30pbs; 1.01% mom) were a key driver in the monthly inflation, along with transportation (1.37%; +18pbs) and food prices (+0.91%; +18pbs). Core prices excluding food and energy goods increased 0.95% from February (0.60% in March 2022). In annual terms, inflation rose to 13.34% in March from 13.28% in February, while core inflation rose from 10.15% to 10.53%, well above the upper bound (4%) of the central bank’s range around 3% target. The central bank’s Board has focused on the headline annual inflation only increasing by small margins (reinforced today: +6bps), and the easing of food inflation (down 2.3ps to 21.8%), while noting that core inflation is expected to continue to rise given inertia and the lag of monetary policy. The Board has adopted a data-dependent guidance. The recent survey showed 2-year inflation expectations falling 9bps to 4.0%.
Core pressures continue to rise at the margin amid significant indexation pressures.
Non-durable goods inflation (mainly food) came in at 19.78% yoy, moderating 79bps from the previous month. Meanwhile, energy prices increased 249bps to 20.52% (above the last peak observed in October of 19.04%). Services inflation rose 36bps to 9.10%, while core inflation picked up 38bps to 10.53%. At the margin, we estimate that inflation accumulated in the quarter was 15.1% (annualized), up from 13.8% in 4Q22. Meanwhile, core inflation reached 14.2% (annualized), accelerating from 10.2% in 4Q22 and 9.2% in 3Q22.
Significant inertia will keep inflation high for the remainder of the year. Despite food inflation falling, widespread indexation supports a slow disinflation process to around 9.0% by yearend (13.1% in 2022), with risks tilted further to the upside.
Vittorio Peretti
Carolina Monzón