February inflation fell like a rocket into the government. This was evident in the long faces spent Tuesday in meetings at the Ministry of the Economy. “We are in a regime of high inflation,” acknowledged a man from Sergio Massa’s economic team, without taking his eyes off a price list underlined with yellow and blue highlighter.
Price dynamics not only broke triple-digit records, the highest since October 1991, reaching 102.5% year-on-year. The 6.6% monthly increase reflected an unstoppable acceleration since November and hit the Fair Prices programme, the basket of 2,000 products with which the minister proposed in February to “stop the inflationary spiral”.
The government renewed the deal last month with a freeze on 2,000 products and caps hikes by 3.2% for another 50,000. In return, the companies were given access to dollars to import $3.5 billion of inputs. But the consumer price index for food rose 9.8%, three times the official guideline.
Within that chapter, the leap of meat stood out. In Economy they attributed it to the collapse in prices due to the oversupply of beef on the market due to the drought and its subsequent recovery with an increase of 21.1% in just one month. For analysts it was only one of several reasons that affected the general index of 6.6%.
“Fair pricing is for shelf prices, wholesale inflation has always been over 6% a month, and on the other hand, 30% CPI for food is meat. So it’s heavily influenced by that price, it has not increased due to the drought, but now it has started to adjust, it has been surprising that it will reach 20% per month,” explained Matías De Luca, economist at LCG.
Since taking office, Massa has declared inflation one of the “main themes” of his administration after the record 7.4% recorded in July. Then from October, and given the difficulties, a ceiling of 4% was set with Pricing Right. In January, checks on hauliers in supermarket warehouses were added, and in February, inspections and fines amounting to 806 million dollars.
“Let’s continue with the price agreements program, it’s working well,” they tried to persuade Economy yesterday Tuesday after INDEC published the data. The official diagnosis yesterday pointed to the flesh, drought, frost, heat wave and even war as the reasons for the acceleration of inflation. On the downside, they recognize the impact of the soy dollar issuance in December, which involved more Leliq and “leaked” into parallel dollars, prices starting to be the “benchmark”.
“Unfortunately it was not only meat in February, but all foodstuffs increased strongly, these price controls have not had their result, this confirms the failure of the program and that this dynamic of distrust and with the variables that run above 6%, it is difficult to stop without a comprehensive plan,” said María Castiglioni, economist at CyT.
One of the difficulties is the extent of the Secretary of Commerce’s measures. Since January, the incidence of agreed prices on the CPI has dropped from 13.1% to 3.2% in February. “Inflation is a macroeconomic problem and cannot be solved with a price agreement, its participation is small and goes unnoticed,” explained Claudio Caprarulo, director of Analytica.
Now, the market is closely following the next steps. Massa’s men ensure they have no measures in their portfolio and set their sights on Miguel Pesce. The central bank chief will define on Thursday whether he will keep rates at 6.3% a month, a variable that has gone into negative territory since February’s inflation data and puts pressure on fixed peso terms.
For now, inflation is already forecast at 7% in March, an increase which, if it materialises, would bring the index to the levels of August, when Massa took office.
Source: Clarin
