In April, Argentina experienced a more significant deceleration in inflation than anticipated, even in light of a shift in currency policy that market participants had predicted would increase volatility. Consumer prices increased by 2.8 percent from March, falling short of the 3.2 percent median estimate provided by analysts surveyed by Bloomberg. That figure has decreased from the 3.7 percent recorded in March. According to government data published Wednesday, annual inflation has decelerated for the 12th consecutive month, now standing at 47.3 percent. Food and non-alcoholic beverages were the primary drivers of price increases.
The peso now floats freely between bands, a significant policy shift introduced on April 11 as part of Argentina’s new US$20-billion programme with the International Monetary Fund. In March, speculation regarding a devaluation of approximately 10 percent fueled price increases. However, the anticipated devaluation did not occur; rather, as the government maintained, the peso has appreciated within the established bands. “We barely saw any pass-through to prices after lifting capital controls because that price adjustment had already been made amid March’s uncertainty,” said Dante Ruggieri, partner at AT Inversiones, a Buenos Aires consultancy firm. “This had more to do with seasonal issues than the currency.”
With just five months remaining before the pivotal midterms, the peso has emerged as a fundamental element of President Javier Milei’s electoral strategy. A stronger peso is likely to enhance optimism among Argentines regarding the economic outlook. Conversely, it may adversely affect the margins and competitiveness of exporters. Ruggieri anticipates that monthly inflation may decline to below 1.5 percent in the lead-up to the October vote. According to a survey conducted by Argentina’s Central Bank, economists anticipate that annual inflation will decelerate to 31.8 percent in 2025, alongside a growth rate of 5.1 percent.