Inflation continues rising

ARGENTINA - In Brief 11 Aug 2022 by Esteban Fernández Medrano

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Although roughly speaking in line with market expectations, bearing in mind the sharp depreciation of the informal FX rate following Martín Guzman´s resignation, July’s 7.4% m/m CPI inflation remains nevertheless a worrisome measurement of the “fever” that the economy suffers due to its significant macroeconomic and political challenges. To get a sense of magnitude, July’s result represents the highest monthly headline inflation since April 2002, when it peaked at 10.2% m/m, shortly after Argentina abandoned Convertibility in January 2002. The next highest monthly record goes back to March 1991, (11.0% m/m) at the end of the 1989/1990 hyperinflation and, coincidentally, the onset of Convertibility. July CPI inflation is therefore already comparable to the results observed during the turbulent periods surrounding Convertibility. As a matter of fact, over the last 20 years, largely due to CFK´s contempt for sound economic policies, which she always subordinated to her political objectives, the different governments ground up what was left of the public´s credibility in the peso, after the stability of the 1990s. July´s 71.0% y/y inflation is still far from the 1989 year-end inflation, of almost 5000% y/y, or close to 20000% y/y during March 1990. But the current macro-inconsistencies are severe enough to anticipate further rising annual inflation, even if August monthly data might show a somewhat lower record than July. Even though August monthly inflation tends to be for seasonal reasons higher than July's, Sergio Massa's becoming Economy Minister marginally improved expectations for the FX rate and for the time being, inflation. What does the 7.4% imply for annual infl...