Argentina's inflation drops to 2021 levels

Argentina's monthly inflation is its lowest since late 2021, marking a key achievement for President Javier Milei as he makes lowering price spirals the centrepiece of his administration, according to a report by Bloomberg.

Consumer prices rose 3.5 per cent in September from the month before, barely touching the Bloomberg survey median of 3.6 per cent. The annual measure of inflation relaxed to 209 per cent, according to government data published Thursday. Inflation had held out at around 4 per cent since May.

Housing and utilities led monthly price hikes, followed by clothing and education.

“Inflation was pretty level across the country and core inflation went down, which is a positive data point that obviously breaks the 4% barrier,” said Maria Castiglioni, director of consulting firm C&T Asesores in Buenos Aires.

In September, Milei cut the country’s primary import tax from 17.5 to 7.5 per cent, and the difference between the official exchange rate and the parallel rate, which also factors into prices, narrowed. Milei said he plans to eliminate the import tax by year-end entirely. He emphasised that capital controls, in addition to the peso's 2 per cent monthly depreciation rate, are going to stay, which also helps contain inflation.

Meanwhile, Milei continued trimming subsidies. The cost of train fares surged nearly 40 per cent in the past month, now selling at the minimum ticket price of 280 from 200 pesos. The cost of water, gas, and electricity shot up by about 4 per cent as the president axed the old government aid, with gas priced higher too.

Milei’s victory lap is expected to continue, with economists forecasting that annual inflation will drop sharply to 40.9 per cent in the next 12 months, according to a monthly survey conducted by the nation’s central bank. The central bank survey, which came out on Oct. 4, showed economists expect annual inflation to decline to 123.6 per cent by the end of 2024.