ARGENTINA – Inflation falls by more than expected in August

We adjusted our inflation forecast for this year up to 49% from 47 in our previous scenario.

Juan Carlos Barboza & Diego Ciongo


Consumer prices rose by 2.5% mom in August, below market expectations of 2.8%, according to Bloomberg and Central Bank surveys, and down from 3.0% in July. Monthly inflation hit the lowest level in one year. The 12-month inflation reading fell to 51.4% in August (from 51.8% in July), while annualized quarterly inflation fell to 40.8% in August (from 45.3% in July).

Core inflation remained stable and above the headline reading. Core inflation came in at 3.1% mom (55.5% yoy), nudged by a hefty increase in education services, which offset the deceleration in food items and nonalcoholic beverages. Annualized core inflation came down to 47.1% in the quarter ended in August, from 49.4% in July. Prices for regulated items rose by 1.1% mom and 37.2% yoy, affected by a reduction in the gas tariff in cold regions. Prices for seasonal products increased by 0.6% mom in August and 52.9% yoy.​​​

We adjusted our inflation forecast for this year up to 49% from 47%. Inflation expectations for the next twelve months remain at 43.7%, according to the latest central bank survey, given the monetary financing of the fiscal deficits and relative price misalignments. An increase in fiscal stimuli – financed by the central bank – is widely expected in the coming days as part of an effort to improve the governing coalition’s performance in the November legislative elections following the significant defeat in the primaries last Sunday. We expect the central bank to continue to curb the depreciation of the ARS through controls to induce further disinflation.

Juan Carlos Barboza
Diego Ciongo