Inflationary acceleration increases the lag of some key prices economic structure, such as energy and public transport prices and even the values consumers pay for food. According to a private estimate, stop stepping on these prices could imply about 60 inflation points more than there are today.
“Argentina’s economy racks up suppressed inflation, produces relative price changes that originated over these three years as a result of traps, controls, freezes and restrictions in general,” Invecq explained in a recent report. “By doing a hypothetical exercise, we estimate that would generate an additional 60% increase over the current general price level trying to return to a “more normal” relative price structure, like the one that was in effect in April 2019, during the last tariff correction”, they estimated in this sense.
“Such an increase, which makes it possible to recompose this structure and avoid perpetuating imbalances, should be carried by the segment of electricity, which would require an increase of more than 250%. Other sectors, such as Communication and public transport are expected to more than double, while food accumulates an average delay of 50%mainly in the fields of cereals, bread, dairy products and oils, not by chance, the foods that are part of the price programs in the supermarkets”, he projected.
According to a private estimate, the halt in ticket, transport and food prices could involve around 60 points of inflation more than those that exist today
At this level, Invecq specified that if there was a price stabilization plan, that 60% of repressed inflation would not necessarily be immediately transferred to the price indices, but rather, if a stabilization program With relative price correction is in place, the approximately 60% percent of inflation removed is not expected to nnecessarily be added to the inertial inflation rate at the time of the correction“, they said.
“With today’s figures, this means that a contained inflation of 60% would not necessarily increase the total price rate to 118% because the current inertia is 58%. On the contrary, If the program is credible, there should be a combination of effects that on the one hand lowers the inertial rate and on the other increases the rate as a result of the relative price correction.”, considered this center of studies.
Inflation fell slightly in April from 6.7% in March to 6%, and analysts believe that a slowdown should take place in the coming months, as the government expects, but with a different magnitude and speed. of what awaits in the official offices, where they hope with an index closer to 4% for May.
A report by Ieral, of the Mediterranean Foundation, analyzes the different aspects to be taken into account to know if there will be a drop in inflation rates in the coming months. “The dynamics of the world will certainly prove to be very important. On the one hand, the international strength of the dollar could negatively affect the price of raw materials. In the very short term, this plays temporarily in favor of a slowdown in inflation of exportable goods”, he underlined.
“However, the counterpart is that, at lower commodity prices, the external and fiscal accounts deteriorate, which generates greater devaluation and pressures on monetary emissions. So, lower commodity prices could ultimately result in a permanent increase in inflationary pressures», considers Iéral.
On the other hand, said this study center that “the evolution of exchange rates (official and free) is difficult for them to generate an anchor of stability on prices. Beyond the commitment with the Monetary Fund to maintain the real exchange rate, since the Central Bank does not have too many international reserves or does not have any type of exchange buffer, the monetary authority is not likely to lag the nominal exchange rate very much relative to inflation”.
According to Iéral, the slowdown in inflation in the coming months will depend on international commodity prices, the accumulation of reserves, the achievement of the monetary issue target, the political conflict in the Frente de Todos and of the joint agreement
There are other elements that will influence. “As for regulated tariffs, the promised adjustment of energy tariffs at the IMF will surely lead to an acceleration of inflation in the very short term of non-tradable goods although later, by tempering subsidies, this will result in lower monetary issuance requirements (and inflation),” said Iéral on the one hand.
On the other hand, he explained that “with regard to monetary factors, the largest monetary issue in April has again increased the surplus of pesos, which will put positive pressure on the prices of goods in the coming. On the other hand, the development of both the supply of pesos and its demand is highly dependent on whether or not the program with the IMF is respected. In this direction, the dynamics of current political conflicts can play a very important role in terms of expectations of this achievement”.
The final aspect will be joint negotiations. “In March 2022, wages showed a significant reaction. Given this and added to the recent wage negotiations of a major union, the dynamic Remuneration can also exert significant inflationary pressure in the short term“, completes the think tank he leads Charles Melconian.