Itaú BBA - ARGENTINA – Inflation ends 2019 at a high level

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ARGENTINA – Inflation ends 2019 at a high level

Janeiro 15, 2020

Our forecast for 2020 stands at 43%

Lower-than-expected month-over-month inflation in December. The CPI increased by 3.7% mom, down from 4.3% in November and below the Bloomberg consensus forecast of 4.05%. Annualized inflation in 4Q19 decelerated to 55.7%, from 69.0% in the quarter ended in November. Thus, annual inflation hit 53.8% last year, marking the highest level in 28 years.

Core inflation was higher than the headline in 2019. Core item prices also rose by 3.7% mom in december, led by food items, in particular meat. At the margin, the core reading decelerated to an annualized 57.0% in 4Q19, down from 74.1% in the three months ending November. Annual core inflation increased to 56.7% in December, from 55.2% in the previous month. Regulated prices rose by 4.6% mom, led by services (health, transport and communications), leading to a 48.2% year-over-year increase in 2019. Prices for seasonal products rose by 2.1% mom and 48.9% yoy.

Inflation will remain high in January (around 3.5% mom). In spite of the public-services freeze and a stable foreign exchange rate of 60 pesos to the dollar, the end of the VAT reduction on certain food items will pressure the CPI basket. Our forecast for 2020 stands at 43%. 

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