Buenos Airus April 15 2023: Inflation jumped in Argentina more than expected as seasonal factors collided with the impact of a historic drought and government overspending to fuel the highest monthly price hikes in two decades.
Inflation accelerated to 7.7% in March, more than the median expectation of 7% among economists surveyed by Bloomberg. From a year ago, prices rose 104.3%, the highest annual level since 1991, according to government data published Friday.
“Policy changes to fix the inflation problem will have to be more drastic the longer it holds about 100%. There’s little the government can do ahead of the October election. A rate hike at the next central bank meeting would keep real rates positive, as agreed with the IMF, but wouldn’t have a practical near-term impact on inflation.”
The surprise price jump poses new hurdles to the political future of Economy Minister Sergio Massa, widely seen as a potential presidential candidate this year within his ruling Peronist coalition. A litany of measures, such as extensive price controls, haven’t tamed inflation. Late last year, Massa estimated the monthly inflation rate would be below 4% by April, a nearly impossible task now.
One of Massa’s deputies, Economic Policy Secretary Gabriel Rubinstein, blamed a severe drought and avian flu for pushing prices higher than seasonal factors normally would have.
“Several of these factors we don’t expect to be present in April, in which case we would expect a drop of some magnitude in the index,” Rubinstein said in a statement Friday.
Education and clothing categories led all increases in March, a month known in Argentina for seasonal price hikes due to the start of the school year. The worst drought in Argentina’s history is also driving pressure on food prices in Argentina, the most weighted category in the country’s inflation index. Food costs rose 9.3% from a month prior as prices for chicken and eggs surged more than 25% due to a breakout of avian flu in Argentina.
The government’s cobweb of currency controls and price freezes have failed to cool inflation or offset the impact of money printing to finance its spending and lack of a credible economic plan in the eyes of investors. Voters in Argentina say high inflation is their top issue ahead of the presidential vote in October.
