ARGENTINA – Inflation down again in July

We maintain our forecast of 47% inflation for 2021, with risks tilted to the upside

Juan Carlos Barboza & Diego Ciongo


Consumer prices climbed by 3.0% mom in July, in line with market expectations (Bloomberg and Central Bank surveys), down from 3.2% in June and posting a fourth consecutive decline. The 12-month inflation reading rose to 51.8% in July, from 50.2% in June, but annualized quarterly inflation fell to 45.3% in July, from 51.7% in June.

Core inflation also declined, but again remained above the headline reading. Core inflation came in at 3.1% mom (55.4% yoy), down from 3.6% mom in June. The annualized core inflation reading decelerated to 49.4% in the quarter ended in July, from 58.2% in June. Prices for regulated items rose by 1.4% 37.1% yoy. Prices for seasonal products jumped by 4.8% mom in July and 58.1% yoy, affected by the increase in tourism services and fruits and vegetables.

Disinflation is slow, as expected, while the distortion of relative prices increases. The central bank will likely persist in its effort to reduce inflation by curbing the depreciation of the ARS through controls (in July, the pace of devaluation fell to 1.0%). Despite new regulations and restrictions, the spread between the blue-chip swap and the official exchange rate recently widened to 80%, driven by the approaching legislative elections amid loose monetary policy. We maintain our forecast of 47% inflation for 2021, with risks tilted to the upside.

Juan Carlos Barboza
Diego Ciongo