Argentina: Inflation picks up in August due to low base effect
September 12, 2017
According to the National Statistics Institute (INDEC), consumer prices in the Greater Buenos Aires capital area rose 1.5% in August from the previous month, down slightly from July’s 1.7% increase and undershooting market expectations of a stronger 1.9% increase. Data for the monthly variation in consumer prices for the whole country in July showed that consumer prices rose 1.4% from July, above last month’s 1.7% increase. The result mainly reflected higher prices for food and non-alcoholic beverages, housing, water, electricity, gas and other fuels, and health services.
According to INDEC, inflation in the Greater Buenos Aires capital area in August came in at 23.1%, above July’s 21.5%, although this was partly due to a low basis of comparison. Inflation thus moved further above the Central Bank’s 12.0%—7.0% target for this year. Shortly after the publication of August’s inflation data by the INDEC, at its 12 September meeting the Central Bank of Argentina decided to keep the 7-day Repo Reference Rate unchanged at 26.25%, in an attempt to keep the disinflationary process going and credibly anchor market expectations for 2018’s inflation at its 8.0%-12.0% target.
The latest data compiled by the Statistical Institute of the City of Buenos Aires showed that inflation accelerated from 22.9% in July to 25.9% in August, the highest reading in four months. The pick-up in inflation was influenced by a low basis for comparison—as in August 2016 the newly introduced gas tariff scheme was suspended—so that inflation came mainly on the back a jump in prices for housing, water, electricity and other fuels and higher prices for food and non-alcoholic beverages and communications. 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.