The dynamics went haywire in December as a result of the exchange rate jump, the liberalization of regulated prices and the elimination of price agreement programs. In this way, the National CPI precipitated and remained at 25.5% monthly. To take magnitude, this is the second highest record since the hyperinflation of 1990. The accumulated in 2023 was 211.4% year-on-year. This is more than double the value recorded the previous year (94.8% year-on-year). For their part, consulting firms and banks predict that in the next three months the inflationary flash will continue. To the official’s honesty, the adjustment of public service rates and, if consistent, a crawling peg at 2% per month will be added.
Although the December record almost doubles that of November (+12.8% monthly), the number for the last month of the year was below the 27% monthly projected in the BCRA’s REM. In December, the impact of the devaluation of 12/13 was manifested, when the official dollar rose 118% to $800, fuel prices were released and items in the food basket had the effect of the fall of the programs of “fair prices” and oil and wheat trusts, among others. The devaluation translated into a divergence between the increase in tradable goods, which increased by 29.5%, and services, which rose by 14.1% compared to the previous month. The accumulated general CPI in the last 12 months experienced a cumulative increase of 228.7% in goods and 165.5% in services.
Core inflation, in December, was 28.3% monthly. This is 2.8 percentage points above the general index (25.5%). In the accumulated year, core inflation was 229.4%. The items that increased the most in December were “Various goods and services” (32.7%), “Health” (32.6%) and Transportation (31.7%). Likewise, “Education” (6.2%) and “Housing, water, electricity, gas and other fuels” (13.8%) showed the smallest variations.
Inflation, in the food segment, for December, was 29.7% (4.2 points above general inflation) and this is explained by the spike in the price of meat (which weighs between 7% and 13 % depending on the geographic region in the CPI-general). The meat and derivatives category (GBA) registered a monthly increase of 36.9% in December. In the accumulated of the last 12 months, food increased by 251.3%.
The regulated index had adjustments below the general index. Starting in February and March, they will gain momentum with respect to seasonal prices and core inflation. In the accumulated 2023, regulated ones rose by 164.9% year-on-year and seasonal ones by 179%.
In summary, the projections for January 2024 give inflation in the order of 25%, according to the BCRA’s expectations survey. The projections are adjusting upwards. And for February and March, 18.2% and 15% monthly are expected, respectively. If this scenario materializes, we would have 113% inflation in just 4 months and almost 70% in the first quarter of 2024.
Clearly, the anchoring of expectations lies in fiscal adjustment and recession as the axis disciplining prices through the game of supply and demand. We are talking about “real anchors” and not nominal ones, which leads to a longer period to consolidate the disinflation process. It is possible that with the large harvest a stabilization program can be advanced.
*Federico Pablo Vacalebre is a professor at the CEMA University.
by Federico Pablo Vacalebre
