Argentine Consumer Prices Slow for Second Month in JulyBy
Consumer prices rose 2.0 percent vs 3.1 percent in June
Slowing inflation gives central bank space to lower rates
Inflation in the greater Buenos Aires area slowed for a second consecutive month in July on tighter monetary policy and as the effects of a devaluation and utility tariff increases wore off.
Consumer prices rose 2.0 percent from June, the national statistics agency said in a report. The report was the third measure of the index following an overhaul of the country’s economic statistics that had been deemed unreliable by the International Monetary Fund. Prices had risen 3.1 percent in June and 4.2 percent in May.
President Mauricio Macri made taming inflation one of his key objectives after taking office in December. Still, inflation has soared this year after Macri removed currency controls, causing a 30 percent devaluation of the peso, and removed subsidies on energy bills causing prices to rise by more than 500 percent.
“In the second half of the year you’ve got various factors that converge so that the inflation rate slows since you’re no longer going to have the tariff adjustments of the first half,” said Martin Vauthier, an economist at Estudio Bein in Buenos Aires. “The central bank now has plenty of margin to lower rates further.”
Vauthier said he expects annual inflation to close the year at 40 percent.
The central bank raised interest rates on its Lebac notes in its weekly auctions to as much as 38 percent in a bid to drain pesos from the economy. It has gradually lowered those rates to below 30 percent on signs that inflation is beginning to slow.
After initially setting itself a target of slowing annual inflation to between 25 percent and 20 percent, the government now says its aim is for monthly inflation to slow to 1.5 percent by December. Prices rose 2.2 percent from a month earlier and 47.2 percent from a year earlier, according to the City of Buenos Aires consumer price index, which the government used as a proxy while it restored its own measure.
Price increases were led by entertainment, food and drink and education, which rose 5 percent, 2.7 percent and 2.4 percent respectively. Clothing fell 0.8 percent from the previous month.
Matters could be complicated by the judicial system that has frozen the tariff increases, saying the government didn’t follow due procedure by failing to provide public consultations before effecting the hikes. The government expects the Supreme Court to make a decision on an appeal against the rulings by Aug. 18, Energy and Mining Minister Juan Jose Aranguren said Friday.
— With assistance by Rafael Gayol, and Silvia Martinez
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