Argentine Inflation Accelerated Less Than Forecast in March

Argentine inflation slowed more than economists expected in March as the government expands price agreements with retailers after devaluing the peso in January by the most since 2002.

Consumer prices rose 2.6 percent last month, trailing the 2.9 percent median forecast of nine economists surveyed by Bloomberg. Argentina’s nationwide inflation index, which was released this year and doesn’t have annualized data, shows prices have risen about three times faster in the first quarter than in the same period last year as measured by the previous Greater Buenos Aires index.

Argentine President Cristina Fernandez de Kirchner’s government placed price caps on basic goods such as bread and milk this year to contain inflation sparked by a 19 percent devaluation in January. After consumer prices jumped 7.1 percent in the first two months of 2014, inflation is now easing after the price accords, higher central bank interest rates and auctions that have drained pesos from the economy.

“Prices fell in all categories apart from clothing and education,” Economy Minister Axel Kicillof said today at a press conference in Buenos Aires. “From what we’ve seen so far in April, this trend will continue.”

Three Times

Investors have reaped the gains of faster inflation through peso-denominated bonds linked to consumer prices. A basket of the securities has risen 28 percent this year, more than three times the average for similar notes in Latin America, according to Barclays Plc.

Government inflation-linked bonds due 2033 reversed gains after the report, falling 0.09 centavo to 282.44 pesos at 4:10 p.m. in Buenos Aires, according to data compiled by Bloomberg. The yield rose two basis points to 7.84 percent.

The notes will probably stabilize after the rally as official inflation that reflects actual price increases was priced in, according to Fausto Spotorno, chief economist at research firm Orlando Ferreres y Asociados,

“They gained so much after the government started reporting more reasonable numbers, there’s probably not much room for additional increases for now,” he said in a telephone interview from Buenos Aires. “Inflation is slowing a bit after the central bank raised rates and as the economy slows.”

38.5 Percent

Still, Orlando Ferreres’s 2014 inflation forecast is 38.5 percent, higher than last year’s 29 percent, he said.

Fernandez, 61, has overhauled the official statistics agency this year after the International Monetary Fund censured the South American nation in 2013 for misreporting economic data. Inflation and economic growth figures are now more in line with private estimates as the government looks to repair ties with foreign creditors and obtain new financing to rebuild reserves that have tumbled 30 percent in the past year.

The government said last month that gross domestic product expanded 3 percent in 2013, down from previous estimates as high as 5.1 percent.

To contact the reporter on this story: Daniel Cancel in Buenos Aires at dcancel@bloomberg.net

To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Robert Jameson, Daniel Cancel

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