Prices in Argentina picked up in line with expectations last month as President Javier Milei’s party faced a crunch midterm election.
Consumer prices rose 2.3 percent in October, in line with the median estimate of economists surveyed by Bloomberg, and up from September’s 2.1 percent reading. Annual inflation slowed to 31.3 percent, according to government data published Wednesday.
Milei faced a crucial midterm election in late October that took on out-sized market significance as investors braced for the worst and traders and families alike swapped their pesos for US dollars following a landslide loss in a local September election. The currency depreciated roughly 4.5 percent in October even as the US Treasury bought pesos in the local FX market to stabilise the peso as part of a US$20-billion swap line.
Milei’s party in fact reversed their September results and won the October vote by a wide margin, sending bonds soaring and stabilising the currency.
Food and beverages drove the pick-up in inflation, according to government data. Transport and housing costs saw the greatest increases.
“Argentina’s October CPI print underscores that, while disinflation has been remarkable over the past two years, further progress from more moderate levels could be a challenge. It also highlights the limits of the current FX regime — inflation running faster than the pace by which the band ceiling is adjusted implies an increasingly tighter limit for the real exchange rate," said Jimena Zúñiga, Bloomberg's Argentina economist.
Declines in the peso are fuelling smaller increases in consumer prices than in the past. A slowing economy that’s restraining demand; Milei’s tighter fiscal and monetary stance; and, the government’s determination to defend the peso’s trading band account for the diminished pass-through.
Argentina is expected to finish the year with 29.6 percent annual inflation this year, according to an October Central Bank survey of economists. Growth is expected at 3.9 percent.
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