Argentina: Central Bank misses inflation target in 2017
According to the National Statistics Institute (INDEC), consumer prices in the greater Buenos Aires capital area rose 3.4% in December compared to the previous month, which was significantly above November’s 1.2% rise. Core consumer prices in the Buenos Aires metropolitan region also increased from 1.3% in November to 2.0% in December. Inflation in the greater Buenos Aires capital area jumped from 20.9% in November to 25.0% in December.
Data for the month-on-month variation in consumer prices for the entire country showed increased 3.1% in December from the previous month, coming in above November’s 1.4% rise. The result reflects in large part a 17.8% increase in prices for households, water, electricity, gas and fuel. Core consumer prices, which exclude volatile and non-regulated products, rose 1.7% month-on-month (November: +1.3% mom). In annual terms, inflation for the entire country reached 24.8% in December, coming in above November’s 21.0% increase and far exceeding the Central Bank’s 12.0%–17.0% target for 2017.
The latest data compiled by the Statistical Institute of the city of Buenos Aires showed that inflation in the city of Buenos Aires rose from 23.6% in November to 26.1% in December. The inflation data released by the Statistical Institute of the city of Buenos Aires and INDEC are not comparable, as the structures of the two indices are not the same. This is due to different baskets of goods, samples and data collection methodologies.
Stubbornly-high inflation is a persistent problem for the government, since it will have to continue accumulating external debt to finance the fiscal deficit in order to meet its objective of trimming elevated public spending. The Central Bank’s decision to ease its inflation target for 2018 and 2019 implies that short- and mid-term estimates of government spending, earnings and the fiscal deficit are putting at risk the health of public finances and the government’s fiscal consolidation efforts.