IMF Rejects Consensus Call of Argentina Missing Inflation Target

  • IMF forecasts CPI will slow to 25% ceiling of target range
  • Brazil recession to prompt sharper regional contraction

Argentina’s inflation will slow to the very top of its target range by year-end, the International Monetary Fund forecast, showing more optimism than most economists.

Inflation will slow to the 25 percent ceiling of Argentina’s target range by year-end, the IMF said in its World Economic Outlook published Tuesday. That is lower than all estimates from economists surveyed by Bloomberg except that of Pantheon Macroeconomic Advisors, which has the same forecast as the IMF. Economists’ median forecast is for consumer prices to rise 34.2 percent this year.

Argentine policymakers will head to the IMF’s spring meeting this week in Washington just months after Mauricio Macri became president of South America’s second-largest nation. Macri has sought to overhaul the statistics agency that, under his predecessor, underreported price increases and drew censure from the multinational lender. His government has signaled slowing inflation is a key priority to rebuild confidence.

Argentina’s central bank has sought to quell inflation by boosting interest rates on short-term notes to as high as 38 percent. With tighter monetary policy, inflation has probably peaked already, bank president Federico Sturzenegger said in an interview at the Bloomberg Argentina Summit on April 4.

Consumer prices rose 36 percent in the 12 months through February, according to an index compiled by the province of San Luis. Macri’s government is using that gauge while it overhauls the national statistics agency.

Argentina’s economic reporting has been questioned since 2007 when then-President Nestor Kirchner replaced senior officials at the national statistics agency and Christine Lagarde, the IMF’s managing director, censured Argentina in 2013 for providing unreliable numbers.

Argentina is targeting 17 percent inflation in 2017. The IMF forecasts inflation will exceed that level, slowing only to 20 percent, in line with the median forecast from economists surveyed by Bloomberg.

Growth Slowdown

In its report, the IMF reduced its 2016 economic outlook for Latin America and the Caribbean to a 0.5 percent recession, from a 0.3 percent decline as of January. That was due largely to a deeper recession forecast for Brazil, now estimated to contract 3.8 percent -- roughly the same as in 2015.

The lower forecast for Latin America’s largest economy stems from domestic uncertainties that continue to constrain the government’s ability to formulate and execute policies, according to the report.

The IMF forecast Mexico will grow 2.4 percent this year, down from a 2.6 percent outlook previously. Its forecast for Argentina to contract 1 percent remained unchanged, and the IMF said the push to correct macroeconomic imbalances and microeconomic distortions has improved medium-term growth prospects in the country.

The IMF lowered its Chile growth forecast to 1.5 percent from 2.1 percent due to lower copper prices and tighter financial conditions. It foresees 3.7 percent growth in Peru from 3.3 percent previously -- this was the IMF’s only increase to growth forecasts among major Latin American nations.

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