Post-cepo boost for Milei as monthly inflation slows to 2.8%

Inflation slowed to 2.8 percent in April, slightly below analysts’ expectations, the INDEC national statistics bureau revealed Wednesday.

April’s figure, coming in at below three percent, is a boost for President Javier Milei, whose government had seen prices soar by 3.7 percent in March.

According to INDEC’s updated data, prices have risen by 47.3 percent over the last 12 months.

This is the first update of the consumer price index since the government opted for a partial removal of the nation's complicated web of currency controls, known locally as the 'cepo'. Officials also announced they would maintain the official exchange rate within a band of 1,000 to 1,400 pesos per US dollar, with a monthly variation of one percent.

Both government officials and private analysts had forecast a figure of around three percent, with some in the administration beginning to boldly claim that inflation will be a thing of the past by this time next year.

Economy Minister Luis Caputo predicted midweek that inflationary dynamics “will collapse” in the near future, as the government is doing “the things that need to be done to converge with international inflation.”

The Central Bank’s market expectations survey (REM) had forecast a rate of 3.2 percent for April.

Consumer prices have risen 11.6 percent since the beginning of the year – a sharp contrast to the 211 percent annual inflation rate recorded in 2023. President Milei took office in December that year, when prices jumped 25 percent in a single month after a fierce devolution.

The highest increases last month were recorded in the restaurants and hotels category, which rose by 4.1 percent, driven by hikes in the cost of eating out.

Recreation and culture rose by four percent, while food and non-alcoholic beverages increased by 2.9 percent, led by price rises in meat and related products, dairy and eggs, and bread and cereals.

The two divisions that registered the lowest variations in April were transportation (up 1.7 percent) and household equipment and maintenance (0.9 percent).

The Buenos Aires City government reported Tuesday that inflation in the capital stood at 2.3 percent last month – down 0.9 points from the 3.2 percent recorded in March.

Milei celebrated the April national figure on social media, calling out what he described as “hitmen with microphones” – a phrase he uses to describe journalists and economists critical of his government. “Several of these econo-frauds were saying inflation would jump to five or even seven percent,” he wrote on social media.

The drop in inflation follows a sharp fiscal adjustment programme, with Milei’s “chainsaw” slashing public spending by 4.7 percent of GDP. It also resumed talks with the International Monetary Fund (IMF), securing a new US$20-billion credit line and another US$22 billion from other multilateral lenders.

Analysts caution, however, that upcoming hikes in regulated utility rates and fuel prices could reignite inflationary pressures in the months ahead.

Some independent economists have warned the downward trend could reverse. “Core inflation remains high and the pause in utility price hikes won’t last forever,” said Marina Dal Poggetto, director of EcoGo consulting firm. “There’s progress, but it’s fragile.”

Inflation remains a central concern for voters ahead of the October midterm elections, which will reshape Congress. Controlling inflation is one of Milei’s key aims as he seeks to consolidate power and move forward with his reform agenda.

Despite the official figures, many Argentines remain sceptical. “This number is fiction,” said Elizabeth Segovia, a customs clerk, in Buenos Aires. 

“My salary hasn’t changed in six months. Even if inflation goes down, my pay doesn’t go up. I can’t make ends meet – I go to the supermarket and cry,” she added, saying she supports three children on her income.

– TIMES/PERFIL/AFP