By Hernan Nessi
BUENOS AIRES (Reuters) – Argentina’s monthly inflation rate dropped to 2.2% in January, its lowest since mid-2020 after libertarian President Javier Milei took office just over a year ago ushering in austerity measures that have helped stabilize the embattled economy.
The consumer price index rise came in just below analyst forecasts of 2.3% and down from 2.7% in December, a win for Milei as he looks to maintain positive momentum on the economy amid talks over a new International Monetary Fund deal.
Argentina, a major grains exporter and budding energy producer, has been fighting triple-digit inflation in recent years, which gave the South American country the dubious crown of having the world’s highest annual inflation rate.
That 12-month rate neared 300% early last year but has come down since, clocking in at 84.5% in January, data from the official INDEC statistics agency showed. Monthly inflation that peaked around 25% has been between 2% and 3% since October.
Bringing down inflation is key for Milei’s government, which wants to scrap capital controls that hurt business and investment. It wants inflation to stay below 2% to allow it to end the controls, though analysts remain wary of when that might happen.
“We expect inflation to remain in line or slightly higher than what was recorded in January,” said Argentine economic consultancy Eco Go. “However, the downward trend will continue throughout the year, possibly breaking the 2% barrier in the second half of the year.”
Eugenio Mari, chief economist at the Fundacion Libertad y Progreso, was more bullish, saying inflation in February could slide to 1.7% with the controlled currency devaluation guided by a “crawling peg” slowing to 1% per month from twice that before.
“February will be the month of the crawling peg, which will help to slow down tradable prices; however, the key will be that the rest of the monetary policy must be consistent with the peso depreciating at that speed,” said Mari.
(Reporting by Hernan Nessi; Editing by Adam Jourdan, Hugh Lawson and Alistair Bell)
