Inflation in Argentina slowed more than expected for a second straight month in June, prolonging a brief respite even as living costs continue increasing at an elevated pace.
Consumer prices rose six percent in June, below analysts’ expectations of 6.95 percent. From a year ago, inflation accelerated to 115.6 percent, the highest annual rate since 1991 when Argentina’s economy was exiting a sharp bout of hyperinflation.
Communication, healthcare and utilities led monthly price increases in June, according to government data published Thursday.
As monthly prices cool, Argentina’s Central Bank board is expected to hold its key benchmark rate at 97 percent through the presidential primary vote on August 13. While the monetary authority has tightened policy aggressively this year, raising the key rate from 75 percent to 97 percent, it’s failed to tame inflation.
After six months of steady increases, two months of modestly slower inflation will come as a welcome relief to Economy Minister Sergio Massa, the ruling party’s presidential candidate in this year’s election.
But annual inflation continues to accelerate into triple-digit territory — the print has increased for 17 straight months — as money-printing, a record drought and unrelenting fears of a currency devaluation fuel more price hikes ahead of October elections.
The drought exacerbated Argentina’s chronic shortage of dollars, translating to an estimated US$20 billion drop in agriculture exports.
Economists surveyed by Argentina’s Central Bank see prices rising 142 percent annually by the end of this year. Argentina’s economy contracted more than expected in April, a sign that the economy is likely to enter recession later in 2023.
by Manuela Tobias & Patrick Gillespie, Bloomberg
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