April inflation ended up being higher than most economists and consultants expected They do price tracking. For this reason, the market is already beginning to recalculate the annual projections of price increases for this year, and even some already speak of, at least, an index higher than 70% by 2022.
In general terms, Analysts consulted by Infobae expect that 6.7% in March and 6% in April will remain the peak of inflation for the year, so in the coming months, mainly during the second semester, a slowdown in the monthly indices should be seen. The question that hangs over is how steep that downward slope will be and, above all, what things could happen in an economy with uncertainties and an unstable political climate, to reverse that expected trend.
According to analysts, the continuity of the political noise caused by the fierce internship in the Frente de Todos, plus any possible failure to meet goals with the International Monetary Fund, either due to an acceleration of spending to face new measures in the face of rising inflation or a lower accumulation of reserves than expected, could be disruptive elements for a path of deceleration in the coming months.
For Soledad Perez Duhalde, Director of Operations of the consulting firm Abeceb, “this is going to be a hot year for inflation, a complex year,” she defined. In that sense, she considered that there are two possible scenarios ahead and a question that floats: “at what number is the cruising speed of this disinflation going to be installed?”
“The first scenario, the most likely, is that of an inflation that lands at an average of 3.7% per month for the second semester. Thus, the year would end with year-on-year inflation to December of between 65 and 70%”, he estimated.
“The second scenario is more disruptive and assumes inflation that persists at current levels of 5 or 6 percent. hundred. With that rate, you reach the end of the year with an inflation of three digits. In practice, it makes it impossible for you to be re-elected, a drop in consumption and strong social conflict,” Pérez Duhalde said.
What should happen for you to decide between one or the other scenario? “Not having a lack of control of public spending and that the Government meets the goals with the IMF and keeps the monetary issue limited”responded the Abeceb economist.
For its part, Maria Castiglioni Cotter, of C&T Economic Advisors, pointed out that the inflation data for April “was very bad” and that it exceeded the general expectation of the market. “The May numbers as they come are not encouraging. They appear lower than March and April, but that slowdown that was consistent with the agreement with the Fund and the monetary and fiscal commitment is not seen, ”he said.
“Basically what happens is that expectations were corrected upwards since March and since then nothing has been done. There is a lot of political noise and paralysis in decision making. There is no anchor and the price reference is being lost. The transmission mechanisms of inflation are very accelerated as well”, he explained.
According to analysts, the continuity of the political noise caused by the internment in the Frente de Todos, plus any eventual non-compliance with the IMF could be “disruptive” elements for a path of slowdown in the coming months.
“Indexing and peg adjustment speeds up this process. What we see is a fall in the demand for money, so people want to get rid of the pesos. That is careful with the idea that it will slow down noticeably in the coming months”, continued Castiglioni Cotter.
“It is a risky scenario because a rate adjustment is ahead and a Central Bank that has to accelerate the official dollar. Everything plays to the rise of prices. Unless the Government gives a strong political signal, it is difficult to stop this inertia, beyond the collaboration of the global situation, which has an impact, but the acceleration has more to do with local issues”, he opined.
According to Martin Kalos, director of consultancy Epyca, record monthly inflation may be over, but measured year-on-year there is still room to go higher. “The interannual did not touch the peak. This 58% (from April) which is the highest since the end of hyperinflation is going to rise in the coming months, because they are compared against months of inflation last year of between 2.5 and 3.3 percent. Until we drop to those intermonthly rates, the interannual rate will not go down”.
consulted by Infobae if the -monthly- inflation peak was in March, Kalos responded: “That 6.7% will not be exceeded if nothing too serious happens, such as a new external shock. That shows not only the inertia with which the economy came, but also the impact of the war and the rise in commodity prices.”
“That does not mean that lowering it is guaranteed. It is possible that May and June we will have numbers that do not fall below 5% and only with the increases planned for June, that month inflation may be higher than in May. It’s not necessarily a permanent slowdown but there can be ups and downs,” Kalos said.
“It will take a couple of months to lower it from 5% per month”, He anticipated and finally mentioned that “the uncertainty of the policy is incorporated in the fact that inflation expectations do not drop”, so the official internal and what happens with the Monetary Fund would have less relevance when waiting for a new sharp jump .
Meanwhile, for Ricardo Delgadodirector of Analytica, “the inflation that arises from our model and the information we have for May gives us 5.3%, because the impact of violent international increases is beginning to slow down,” he commented.
“Clearly, inflationary inertia and the largest parities put a high floor on it, which is why we project 70.7% to December and that implies a marked slowdown,” he warned. In other words, to meet that 70%, “the next few months should be between 4 and 5% and end the year at just over 3% in November and December. That is a great challenge for economic policy,” Delgado mentioned.
One factor to avoid even worse numbers is that “the implementation of the agreement with the Fund begins to work, that is what can give the program some reasonableness to deflate and bring the indices to the 3 or 3.5 percent zone” , he concluded.
The LCG consultancy, founded by the former Minister of Economy and current senator Martin Lousteauestimated that “in an optimistic framework, a slowdown in monthly inflation to records of 4% supposes an annual inflation of 68.4% to December”. “However, this seems unlikely,” defined in a report this afternoon.
“On the effects of higher international inflation, at the local level, those derived from the lifting of some of the anchors that, until last year, contained the dynamics of prices will be added. For now, the BCRA has been accelerating the slippage of the official exchange rate as committed to the IMF, and the Government advanced in public hearings to lift the rate freeze”, they considered.
“The impacts of the first and second rounds will be felt in the coming months, so from LCG we have corrected our inflation projection upwards to levels above 70% annual to December”, they anticipated.
“The interannual did not touch the peak. This 58% (from April), which is the highest since the end of hyperinflation, is going to rise in the coming months, because they are compared to months of inflation last year of between 2.5 and 3.3 percent” (Kalos ).
On the other hand, according to Pedro Martinez Gerbereconomist at PxQ, the consulting firm created by the former Vice Minister of Economy Emmanuel Alvarez Agispart of the accelerated inflation has to do with the very characteristics of the economic program agreed upon with the IMF.
“The agreement with the IMF is inflationary: it was arranged that tariffs be increased to reduce subsidies, the real exchange rate cannot be appreciated and public spending is indexed. In this context, there was the shock of international prices as a result of the war that led to a jump in inflation in March,” he told Infobae.
“One could expect a slowdown in the price variation rate in April, but the inflation data does not reflect the same. Core inflation was higher in April than in March. The contagion of the shock to the rest of the prices of the economy is being very fast, as reflected by the reopening of joint ventures in various sectors, ”he completed.
While, Thomas Ruiz Palaciosa Strategy analyst at Consultatio Financial Services, pointed out that “since last year we have seen that we are entering a new inflationary regime whose dimensions are still unknown. The data for April, which was again well above expectations, reflects the same as our predictive models: the factors that traditionally explain price dynamics are falling short and expectations are playing an increasingly important role”, warned.
“Furthermore, given that the economy has no anchors to combat inflation, risks to upside surprises are substantial. Going forward, considering the upcoming tariff adjustment and the potential higher rate of devaluation that will be necessary once the seasonally most favorable period of agricultural settlements has ended, added to the aforementioned structural component, we see that breaking down the current dynamics will be very challenging” , he concluded.
For Nicholas Zeolla, chief economist at the Development Research Foundation (FIDE) “for the general index, I don’t think it will be the peak, because the impact on the index of the rate increases in the following months still remains. Perhaps we are facing the peak in the food category, a central component of the CPI and that has a strong imported effect”, he explained.
“Several international studies -such as the World Bank- are indicating that by the end of the year, food and energy raw materials would begin to correct their rises. However, they would not retract previous prices. Our scenario is that inflation in 2022 will be 65%, and we do not expect a floor of less than 3% in any month between now and the end of the year.“, advancement.
From Kirchnerism there were questions about the results of economic policy in terms of inflation. The economist and former deputy Fernanda Vallejos He said that “unlike March, a first conclusion is that, in April, the lower increase in regulated prices contributed to reduce the inflation rate in relation to the previous month. Unfortunately, this situation will be altered by the tariff increase demanded by the IMF“, critical.
In addition, he came out to dispute the argument that the monetary issue is a factor that is related to inflation, which is one of the elements of “multicausal” inflation that is usually taken into consideration. Martin Guzman. “It’s false,” Vallejos believes. “Observable elements that could corroborate the hypothesis are absent or unclear. There is no systematic relationship between the dynamics of monetary aggregates and the inflation rate. The correlation between variations of both variables is close to 0 and sometimes negative”, she concluded.
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