Argentina: Inflation continues its descent in June
July 18, 2017
According to the National Statistics Institute (INDEC), consumer prices in the Greater Buenos Aires capital area rose 1.4% in June from the previous month, marginally up from May’s 1.3% increase. INDEC also released for the first time data for the monthly variation in consumer prices for the whole country in June, which showed that consumer prices rose 1.2% from May. The result undershot market expectations of a stronger 1.4% increase and mainly reflected higher prices for recreation and culture, housing, water, electricity, gas and other fuels, and health services.
According to INDEC, inflation in the Greater Buenos Aires capital area in June came in at 21.9%, significantly below May’s 24.0%. Starting from this release, inflation for the whole country becomes the reference indicator for the Central Bank of Argentina (CBA). Nevertheless, as the National Statistics Institute hasn’t yet collected twelve consecutive CPI readings for the whole country and thus doesn’t have the necessary base of comparison, the CBA is temporarily using the CPI readings for Greater Buenos Aires up to December 2016 as a base of comparison, and the CPI readings for the whole country from January 2017 onwards. National inflation came in at 21.7% in June, still above the Central Bank’s 12.0%-17.0% target for this year. Therefore the Central Bank of Argentina decided to keep the 7-day Repo Reference Rate unchanged at 26.25% at its 11 July meeting, once again sticking to a tight monetary stance.
The latest data compiled by the Statistical Institute of the City of Buenos Aires show that inflation slowed from 25.4% in May to 23.4% in June, the lowest reading in four years. Inflation came mainly on the back of higher prices for communications, alcoholic beverages and tobacco and housing, water, electricity and other fuels, although prices for all sub-categories—except education—registered slower annual increases than in May. The different inflation data released by the Statistical Institute of the City of Buenos Aires and INDEC are not comparable, as the two index structures are not homogeneous. This is due to different baskets of goods, samples and data collection methodologies.