Market consultants in Argentina raised their expectations of 2018 inflation from 27.4 to 30 percent while scaling down their growth projection from 1.3 to 0.5 percent since May, a Central Bank report has revealed.
The INDEC national statistics bureau has registered a retail price inflation of 11.2 percent for the first five months of the year with the Mauricio Macri government publicly admitting that “there will be more inflation.”
Among the factors behind this escalation of inflation, a cumulative devaluation of almost 35 percent so far this year figures prominently among other monetary and fiscal causes, according to private-sector analysts.
“The market expects 30 percent inflation for 2018,” indicated the monetary authority in its REM (Relevamiento de Expectativas del Mercado) report. In January this report calculated 17.4 percent. In May this estimate was raised to 27.4 percent.
Last year, the government and the Central Bank had similar forecasts of a 10 percent rise in retail prices. But last December 28 the inflation target was modified and raised to 15 percent.
When the government decided in May to request an urgent stand-by from the International Monetary Fund (IMF) to calm the markets, it abandoned the inflation targets.
In the face of a run on the currency and the financial tension shaking this country almost without pause since April, the Central Bank has recently raised statutory reserve requirements and offered the market a bond swap. Both measures are aimed at soaking up pesos and preventing them from joining the frantic purchase of dollars.
For the moment, raising the prime interest rate to 40 percent and the Lebacs Central Bank bonds to 47 percent, both world records, have failed to produce the expected results. On secondary markets Lebacs were quoting at 65 percent last Tuesday, according to market consultants.