Inflation projections better than a month ago in Argentina

Inflation projections better than a month ago in Argentina

The Argentine Central Bank’s (BCRA) monthly Market Expectations Survey (Relevamiento de Expectativas del Mercado – REM) for June released Friday forecasts inflation to reach 142.4% by the end of 2023. The study details the forecasts of institutions, companies, organizations, and specialists on the evolution of the main economic variables.

After several months with significant upward adjustments, inflation projections for 2023 showed a downward dynamic, with a figure 6.5 percentage points lower than a month ago.

June’s inflation was forecast to stand at 7.3%, after an overestimation of 1.2 p.p. in the previous REM with respect to May’s data. After the REM participants provided their forecasts to the BCRA, new information was released suggesting that the monthly inflation could be even lower.

”Both the various high-frequency indicators of wholesale and retail prices monitored by the BCRA and the CPI of the Autonomous City of Buenos Aires already published (7.1% overall increase and 6.1% in goods, during June) suggest a reduction in monthly inflation greater than that predicted by REM analysts,“ the BCRA said in a statement.

”Given that the weights of goods and services between the national CPI and the CPIBA are different, the recently published data would imply an inflation that, with high probability, would be below 7% per month. In fact, the main groupings of the CPIBA and the national CPI tend to show similar evolutions which, when using different weighting structures, result in different monthly variations of the general levels,“ it added.

In June, ”meats and derivatives increased 2.6% in the CPIBA, the rest of the goods showed an increase of 6.5% monthly, while services increased 7.9%. By using the weights of the basket of goods and services of the national CPI, such variations result in an estimated monthly inflation of 6.5%,“ the report went on.

The national CPI and the CPIBA ”have significant differences both in the methodology (base periods of the indexes, informants, consumption baskets, etc.) and in the geographic coverage, among other aspects. This implies that the 6.5% is only an estimated variation, which will surely differ from the data to be released by INDEC on July 13. Taking into account that regulated services (particularly electricity and transportation) registered higher increases in CABA than those estimated for the rest of the country, the general level of inflation at a national level could be even lower than 6.5%,” the BCRA projected.