The dollar, meat and tariffs limit the decline in inflation

The Argentina will end in 2025 inflation lowest cumulative value in eight years. However, that is Consumer Price Index (CPI) It has shown a clear upward trend for six months, overshadowing one of the main advantages of presidential management. Javier Milei.

The jump from dollar In the last few months the price increase of Meat in the anteroom of the parties and the increases in extra costs They set a floor for CPI variations that is difficult to break. This is the vision that banks, consulting firms and analysts share in their recent reports.

The yellow light came on with the November data released last week: the CPI rose 2.5%, recording six almost continuous months of increases. “Core inflation,” which excludes regulated and seasonal prices and stood at 2.6%, was also not encouraging, a sign of sluggishness that is difficult to break. In turn, interannual inflation rose by a tenth compared to October, reaching 31.4%, ending a streak of more than twelve consecutive months of slowdown.

In any case, these are much lower values ​​than those adopted by the administration Alberto Fernandez. In December 2023, during the presidential transition, inflation was 25.5% monthly and 211% year-on-year. Milei wants to get it to zero by August next year.

One of the key factors behind the recent momentum has been the development of the exchange rate, according to consulting firm Econviews. All dollar rates were above inflation last year, implying a devaluation of the peso: the official value increased by 41.2% ($1,438.40), the MEP by 39.9% ($1,476), the cash price with settlement by 41.3% ($1,506.70) and the blue by 34.4% ($1,445), compared to inflation of 31.4%. The implementation of the exchange rate band system since April has been crucial, in contrast to what happened in 2024, when a strong appreciation of the peso prevailed.

“The dollar, which initially lagged and helped reduce inflation and then adjusted from July onwards, largely explains the recovery. But it would be a mistake to delay it again: it would mean “bread for today and hunger for tomorrow” and keep inertia alive“Econviews highlighted.

The Invest in the Stock Market (IEB) group stressed that the sequence of monetary expansion, exchange rate rise, wholesale inflation acceleration and transmission to retail prices would have been exhausted in November. He noted that the dollar remains stable at around $1,500, that no new increases are forecast and that overall inflation has returned to 2024 levels. Within this framework, they predict that the CPI will resume its downward trend and continue the disinflation process.

However, for consultancy ACM, recent dynamics in food – particularly meat – and the recomposition of public service tariffs continue to put pressure on the price index and slow a downward correction. According to him, there will not be a renewed increase in the nominal value, but rather a more gradual process of disinflation than expected at the beginning of the year.

Regulated prices continue to be the main drivers of inflation so far this year, in line with the correction of items that had lagged in previous administrations. Of particular note are the increases in education (51.7%) and in housing construction, water, electricity, gas and other fuels (37%). At the ACM, they pointed out that the gap in goods prices suggests that this dynamic may continue in the coming months, and also highlighted the sharp increase in restaurants and hotels (+37.9%), which contributes to higher inflation in the services sector.

Banco Mariva, for its part, believes that the correction in regulated prices observed in November – especially for fuel – will be transmitted to non-tradable goods in the coming months. In addition, he warned that the deflationary effect of imports It decreases with a higher exchange rate, a relevant factor in December and January due to seasonal adjustments related to the holidays. In addition, lower interest rates could lead to a slower disinflation process.

Econviews forecast a “slightly quieter” December in terms of prices. They are playing against the announced increases in electricity and gas tariffs of around 3 percent. There were also increases in AMBA for public transport (4%), fuel (4%) and prepaid (2.3%). “On the positive side, our survey of food and beverage prices showed an increase of 0.5% in the second week of the month, which represents some relief compared to previous measurements. We forecast an increase of 2.2% for the entire price group, ending the year at 30.7%,” the consultant said.

“We expect inflation to be back above 2% in December, so the annual inflation rate would be around 31%.” and it would be the best record since 2017 (24.8%).“, predicted the consulting firm Suramericana Visión. “For the coming months, we continue to forecast inflation rates in the region of 2%.” We expect 2026 to end with 20% annual inflation starting in December (25.5% average annual rate).“, LCG calculated.

Added to this diagnosis is the Personal Investment Portfolio (PPI) view, which focuses on the impact of the exchange rate system on price dynamics. According to the exchange company, although inflation is no longer the government’s central priority, unlike in the first year of management, its rigidity makes the upper limit of the exchange rate band increasingly relevant. As the cap is raised at a fixed monthly interest rate of 1% and inflation is not expected to fall below 1.6% before the middle of next year, the system’s cap continues to rise in real terms.

In this context, PPI warned that “the design of the regime gradually reduces the ability to absorb shocks as long as inflation remains above.” “crawling peg” and further noted that “the net reserve position, still around $2.7 billion, provides limited support.”