Argentina’s consumer prices rose 2.4 percent in March, according to the government’s INDEC statistics agency. The number represents a 0.1 percent drop compared to last month’s, but is staying at rates that, if continue like this throughout the year, would largely exceed the government’s hope of keeping inflation under 17 percent.
Inflation in the first quarter of the year clocked in at 6.3 percent. If projected to the entire year, the rate would end up being of 25.2 percent — more than twice more than the Macri administration’s most optimistic estimate before 2017 began. It is because of this that once Indec released this month’s numbers, the Central Bank (BCRA) increased its interest rates by 1.5 percent — from 24.75 percent to 26.25 percent — in an attempt to help curb inflation.
By rising interest rates, the Bank makes it more attractive for people to buy bonds or treasury notes, consequently taking money out of circulation, lowering inflation in the (relative) short term. However, experts warn that this decision comes at the price of endangering the recovery that could be seen in the Argentine economy in the last quarter of last year.
Some sectors of the economy that saw an increase in their prices as a result of the current season had an important role in the final number. Food, especially vegetable produce, saw one of the sharpest increases. In fact, the head of the Institute of Citizen Social, Economic and Political research, Isaac Rudnik, stated in an interview with Radio 10 that food prices increased by 50 percent over the last 50 months. Other sectors that experienced high increases in their prices were tourism, with 5.8 percent, and clothing, with 4.8.
The government, as paradoxical as it may seem, also contributed to push the number further up by implementing increases in utility bills. According to Indec, the increase in electricity accounted for 0.6 percent of the month’s total number, for example. Other increases that also have to be authorized by the State, such as tuition fees of private schools and toll booth prices, followed suit.
But beyond this month’s increase, what mostly worries the officials in charge of preventing prices from rising so much is the fact that the so-called “core inflation” — the rate that is not affected by the increases that are proper of each season — clocked in at 1.8 percent, a number that is considered high for the government’s goals.
Press reports indicated that these non-auspicious numbers are causing rifts in the economic cabinet, the sector of the government that has undergone the most shake-ups during the Macri administration. According to Clarín, the new head of Banco Nación, Javier González Fraga, stopped attending the meetings the area’s top officials have every day because his criticism of BCRA head Federico Sturzenegger’s decisions was not well received. He argued that the entity increased its interest rates way too much and that this will have a negative effect in the economic activity the government is so set on jump-starting.