Argentina's inflation rate hit 2.9% in January, extending upward trend

Inflation accelerated in January to 2.9 percent – the fifth straight month consumer price hikes have cleared the two-percent threshold. 

Prices have increased 32.9 percent nationwide over the past two months, according to official data from the INDEC national statistics bureau. 

Argentina’s consumer price index rose 0.1 points from December, above the expectations of analysts. 

Food and non-alcoholic beverages recorded a rise of 4.7 percent in January, with notable hikes in the price of meat and vegetables. Restaurants and hotels rose 4.1 percent. At the other end of the scale were education, up 0.6 percent, and clothing and footwear, down 0.5 percent.

Seasonal prices were up 5.7 percent, followed by core inflation at 2.6 percent and regulated prices at 2.4 percent.

In the spotlight

Publication of INDEC’s latest report comes with the bureau firmly in the media spotlight. 

Economist Marco Lavagna resigned his post as head of the bureau earlier this month, just hours before Milei’s government confirmed it would block the introduction of a new methodology for measuring price hikes.

The change, which due to come into effect this month, would have updated the consumption basket, giving greater weight to services and utilities over goods. 

The January figure will not be welcomed by President Javier Milei’s government, which has successfully tamed runaway inflation since taking office in December 2023. 

Prices have now been on an upward trend for eight months and have remained above two percent for the last five months.

Economy Minister Luis Caputo said in a radio interview that the January rate had occurred "in a context of relative price readjustment and a few months after a sharp drop in money demand." 

He expressed confidence that inflation would trend downwards soon. 

"The economic programme is based on the fundamental pillars of fiscal balance, strict control of the money supply and the recapitalisation of the Central Bank,” he highlighted. 

Analysts had generally anticipated a slowdown from the 2.8 percent recorded in December. Caputo had predicted in a round of recent television interviews a figure close to December’s reading.

The Central Bank’s most recent REM market expectations survey had forecast a rate of 2.4 percent, though private consultancy firms dipped either below or above that estimate. Most highlighted sharp hikes in the prices of restaurants and hotels and food and beverages, especially fresh vegetables and meat.

Annual expectations, according to the REM survey, are for an inflation rate of 22.4 percent in 2026.

A day earlier, the Buenos Aires City government reported that prices rose 3.1 percent in the capital last month – a rise of 0.4 points when compared to its December rate. 

Year-on-year, prices in the nation’s capital have jumped 31.7 percent, said City Hall’s statistics agency.

Methodology row

The latest INDEC report comes just a week after the government announced it would postpone the introduction of a new methodology to measure consumer price hikes and Lavagna’s resignation.

The planned changes to the CPI methodology and their suspension has reopened debate over how prices are measured. The current system uses INDEC’s 2004-2005 household expenditure survey as a guide – a criteria established more than two decades ago.

Fearing a boost in the monthly rate, the Milei administration has argued that changing the rules for the CPI would lead to an untimely boost. 

The new rules would have reduced the relative weight of categories such as food and better reflect the weight of services and public utilities, which now make up more of a citizen’s spending, among other changes. 

The Epyca consultancy firm said in a report this week that “the new CPI is clearly not simply a matter of measuring the same things with different weightings: new data collection points were added, new items were incorporated and others were dropped from the basket.”

“Good statistical practice would have called for both indicators to be published simultaneously for a period, so they could be compared,” said the firm led by Martín Kalos, adding that “the reality is that making this change just days before publishing the new CPI is a complex problem.”

– TIMES/NA/PERFIL