- Consumer prices rose before Argentina lifted currency controls
- Buenos Aires index is official reference for next few months
Inflation in Argentina’s capital accelerated the most in two years last month as businesses hiked prices ahead of an expected devaluation of the peso under newly elected President Mauricio Macri.
Consumer prices rose 3.9 percent, the biggest jump since February 2014, according to the city government’s statistics agency. Inflation rose 26.9 percent from a year earlier.
“You had the anticipation of the exchange rate correction - it was the most pre-announced devaluation in history,” said Martin Vauthier, an analyst at Estudio Bein y Asociados in Buenos Aires. “As well as the expectation of a correction in the exchange rate, you had the announcement of the elimination of export tariffs.”
The Buenos Aires city index will be used as the main reference for inflation after the government of newly-elected Macri declared a “statistical emergency” in the country. Macri halted the publication of nationwide consumer price indexes until he overhauls the national statistics agency, which may take as long as six months. Under former President Cristina Fernandez de Kirchner, Argentina was the first nation to be censured by the International Monetary Fund for reporting inaccurate economic data.
December’s jump in prices was led by health care, recreation and culture, and food and non-alcoholic drinks, which rose 6.7 percent, 5.9 percent and 4.9 percent, respectively. Within a week of taking office, Macri lifted currency controls and allowed the peso to float. It immediately devalued 27 percent against the dollar.
How quickly prices continue to rise in 2016 will depend on how negotiations for salary increases develop in the coming months and to what extent the government decides to lift subsidies on energy bills, the biggest reason for an estimated fiscal deficit of 7 percent last year, Vauthier said.