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ECONOMY | 13-12-2023 23:28

Argentina November inflation quickened before Milei devaluation

Consumer prices rose 12.8% in November from a month earlier, according to official data. From a year ago, inflation stands at 160.9%.

Argentina’s inflation soared above 160 percent in November ahead of President Javier Milei’s massive currency devaluation that’s likely to accelerate price increases ever further this month.

Consumer prices rose 12.8 percent in November from a month earlier, above the 11.4 percent median estimate of economists surveyed by Bloomberg. From a year ago, inflation hit 160.9 percent, the highest level since the early 1990s when Argentina was exiting hyperinflation. 

The figure is already outdated, as Milei won a presidential run-off against former economy minister Sergio Massa on November 19, ushering in the end of price freezes on hundreds of products that were set to expire after the election and a major currency devaluation of 54 percent that’s expected to send prices spiralling.

The first days of December have already seen price increases of 15 percent compared with a month earlier, and may end the month up around 20 percent, according to consulting firm C&T Asesores. Inflation is the result of “a general coming clean on prices,” including gasoline, according to economist Maria Castiglioni, the firm’s director. JPMorgan Chase & Co forecasts an accumulated rise in prices of 60 percent in December and January, according to a recent note.

Food and beverages led all price increases in November, followed by clothing and living expenses.

In addition to the devaluation, Milei’s economy minister, Luis Caputo, on Tuesday announced a package of measures to cut spending by the equivalent to 2.9 percent of gross domestic product in order to reach fiscal balance in the next year, including critical subsidies to energy and transport. The new government acknowledges the measures will be recessionary — but promises they’re the last hard pill Argentines will have to swallow to redress the previous government’s economic mismanagement.

Milei braced Argentines for tough times ahead in a bleak speech as he took his oath of office Sunday, repeating several times that “there is no money” — a phrase echoed by Caputo during his recorded announcements Tuesday. Milei warned if drastic measures were not taken now, Argentina could see annual inflation reach 15,000 percent.

The Central Bank on Wednesday maintained the benchmark Leliq rate at 133 percent while lowering the interest rate on one-day repo notes to 100 percent from 126 percent.

by Manuela Tobias, Bloomberg

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