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Inflation: Gas and electricity hikes consolidate a high low for mid-year

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Inflation: Gas and electricity hikes consolidate a high low for mid-year

The new increase that will apply in electricity and gas bills For residential users it will continue to keep the inflation boiler burning, which until March accumulated an annual increase of 104.3%. The biggest impact on the price index will come from electricity bills, which will lead to the largest reduction in government contributions.

So far the impact of “regulated prices” (such as public services) has had a very low interference on the consumer price index (CPI) because they are heavily subsidised. However, they started to impact inflation more since September/October last year.

Under pressure from the International Monetary Fund, the government began to eliminate subsidies completely for the so-called high-income sectors and partly for the middle sectors.

The sectors with the highest income will have to pay 125% more for the electricity they consume. The impact on the ticket -in Buenos Aires- is around 75%. With which, in June, given the increases that will apply to the fares, the Edenor and Edesur distributors and the removal of the discounts, tickets for Buenos Aires and the suburbs will have increased nearly 400% year-over-year, in the case of high-income homes.

In case of gas bills will increase by 30% nationwide. And they already rack up a 170% increase over last year.

The increases of the two services They will have an impact on inflation in May. According to Milagros Suardi, an economist at the Eco Go consulting firm, the impact of gas will have an impact of 0.8 percentage points on inflation that month, “regardless of when the bills arrive,” he clarifies.

In the case of electricity, the bills with increases will arrive in homes within about 40/45 days. “There will be a moment of truth and it will be known if the segmentation has been well designed,” stressed another of the consultants.

The last known official inflation figure is for March, when it showed a 7.7% increase. The April number that economists estimate will be close to 7.5/8% will be released on May 15th. And the May index will be known on June 14th.

Also, around May, it is expected the impact of the blue dollar’s rising acceleration on prices which occurred in the last week of April when the currency passed $391 to $466 in one month, and it’s almost close to $500.

While it is difficult to directly measure the impact of the increase in services on the CPI, one of the sources consulted, who preferred to remain anonymous, said: “In principle, this would have an effect on AMBA of the order of 110 % for average consumer households, but winter is coming and a peak in consumption that makes most of the houses change category and therefore the effect on the tariff can also double”commented.

Economists have long raised the need to eliminate energy subsidies because they underline that they represent a “pressure cooker” for the price index.

While technically this “low” inflation will tend to normalize after subsidies are removed, for now it is happening among users with the highest incomes. This is why we look with concern at the impact it will have on the pockets of the middle and lower classes, where inflation continues to erode household incomes.

Source: Clarin

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