Itaú BBA - ARGENTINA – Disinflation continued in February

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ARGENTINA – Disinflation continued in February

Março 12, 2020

Tariff freeze decelerated headline inflation.

Tariff freeze decelerated headline inflation. The CPI increased by 2.0% mom in February, down from 2.3% in January.  At the margin, annualized inflation for the quarter ended in February decelerated to 37.1%, from 49.7% in the previous month. Annual inflation fell to 50.3%, from 52.9% in January 2019.

Monthly core inflation remained stable in February. Core item prices rose by 2.4% mom, led by food and non-alcoholic beverages. The core inflation reading decreased to 40% (annualized) in the quarter ended in February, down from 48.7% in January. Regulated prices rose by a modest 0.7% mom as energy, fuel and transportation tariff remained frozen (28.6% annualized increase according to the 3MMA reading).  Prices for seasonal products rose by 2.5% mom.

Inflation will likely pick up in March. The increase in medicines due to the end of the price agreement with labs and a weaker currency will likely pressure consumer prices this month. The proximity of the wage bargaining season will be a test for the administration and its efforts to eliminate indexation clauses and break inflationary inertia. We forecast inflation for this year at 43%.

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