With the expected rate increase, the new floor for inflation in 2022 is 70%

The registration of 6% in April led private consultants to recalculate upward the inflation floor for this year. Now the economists they estimate it at 70%with a strong share of the rate increase.

Amid the tug of war between Kirchnerism and Minister Martín Guzmán over increasing electricity and gas charges, held public hearings last week, the formal step to begin implementing average increase of 42% for the year and so on slightly reduce subsidies. To this should be added the increase in the water rate, which will be applied in two rounds in July and September, and will begin to be determined at a hearing next Thursday.

As of the April record, economists agreed on an average inflation for the year of 65%, according to the latest Market Expectations Survey (REM) measurement conducted monthly by the Central Bank.

But with the release of the Consumer Price Index (CPI) last month, which marked annual inflation of 58%, the floor was moved from 65% to 70%.

Fernando Marull, director of consulting firm FMyA, pointed out that “in the second semester with inflation equal to 4.1%, inflation in 2022 will be 70%. But due to the high inertia caused by inflation, we do not rule out that it ends higher“.

Marull detailed that in 2022, expected inflation is strongly associated with expected cost increases, same salary (adjusted to parities of 65%), regulated rates -which include everything from energy to schools and prepaid- (with an average of 63%) and the official dollar (which will increase by 55% ), showing an average of 60%. “The difference between the 60% estimated wages/rates/dollars and the 70% projection is explained by inertia, which sums up the global uncertainty, but above all the doubts about economic policy, both from Guzmán and from the Central Bank. “

“Since declaring the‘ war on inflation ’-on March 15- point from consulting firm EcoGo, which also holds an annual forecast of 70%. But they warn that “achieving that record requires a slowdown to 3.5% per year for the rest of the year. It’s not easy considering the dollar and parities are running at 4%, ”

By May, the first two weeks had passed, Preliminary numbers point to a 5% increase. This is how they predict it from EcoGo and FMyA. As for food, they see an increase of 1.2% in the first week, indicating a slowdown of 0.3 percentage points compared to April.

For consulting firm LCG, in the second week of the month, the inflation index accelerated by 0.8 points, marking a weekly variation of 2.1%. “Almost 50% of the total weekly variation is explained by vegetables and baked goods.”

From the EcoGo team, they pointed out that “so exacerbates the risk of reshaping the inflationary regime in the context of growing indexationa BCRA balance that does not improve due to almost certain default in the Monetary Fund and which over the months the government horizon is shrinking“.

LCG also expects a 70%floor. “We expect inflation to be over 70% annually in December. This is due to higher international inflation, which added to the local effects of lifting nominal anchors containing price dynamics. : the lowering of the interest rate continues to accelerate the official change and the rate freeze is expected to be eliminated soonwhich will have a first and second round effect ”.

“In an optimistic framework, reducing monthly inflation to records of 4% is assumed to be an annual inflation of 68.4% as of December ”, retains Guido Lorenzo, director of LCG.

From stock exchange company GMA Capital, Nery Persichini pointed out that the 23.1% increase accrued by inflation in the first quarter equals dangerous 86.5% annually. “In year-on-year terms, we are at the highest threshold since the end of hyperinflation.”

This record indicates that the median monthly inflation of the Alberto Fernández administration is 3.3%, while the median year-on-year variation reaches 49%. “It means we are in the presence of an inflationary context of magnitude, that is annually pulverizes a third of purchasing powerand this is the most complicated since the 1980s, “GMA said.

AQ