Itaú BBA - ARGENTINA – COVID-19 caused disinflation in April

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ARGENTINA – COVID-19 caused disinflation in April

Maio 14, 2020

Still, we note that monetary financing of a growing fiscal deficit tilts risk to the upside.

Headline inflation fell, driven by services and despite persistent rise in some food prices. The CPI increased by 1.5% mom in April, from 3.3% mom in March. So, annualized inflation decelerated once again, now to 31.0% in the quarter ended in April, from 35.2% in 1Q20. Annual inflation fell thus to 45.6% in March, from 48.3% in March.

Core inflation also decelerated in April. Core item prices rose by 1.7% mom, down from 3.1% in March. Disinflation was broad-based across the basket, with the exception of some food prices like meat, fish and eggs. The core inflation reading decreased, to 33.6% (annualized) in the quarter ended in April, from 36.8% in March. Regulated prices fell by 0.7% mom (13.8% annualized in the last three months), mostly due to downward adjustments in phone and mobile services. In the meantime, energy, fuel, and transportation tariffs remained frozen. Prices for seasonal products rose by a hefty 4.8% mom, as the distribution of vegetables and fruits remained impaired by the lockdown.

We forecast 40% inflation this year, down from 53.8% in 2019, due to a severe recession and moderate wage adjustments. Still, we note that monetary financing of a growing fiscal deficit tilts risk to the upside.

Juan Carlos Barboza
Diego Ciongo



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