Argentina\u2019s push to further curb inflation faces risks in coming months after President Javier Milei hammered it down from triple-digit territory, the Central Bank said in its monthly monetary policy report.<\/p>\n
A change in methodology, persistently high beef prices and upcoming increases in utility bills could all impact consumer prices in the near term, according to the report. Costs for clothing and education also tend to jump significantly in March for the start of school in the Southern Hemisphere. Beef, a staple of the Argentine diet, rose 17.3 percent from October to December.\u00a0<\/p>\n
\u201cDuring the first quarter of 2026, the pace of the disinflation process faces risks of a seasonal nature and therefore transitory,\u201d the Central Bank said in its December report, published Thursday afternoon. It added that officials also face \u201cuncertainty\u201d under new methodology introduced by the national statistics agency.\u00a0<\/p>\n
The new outlook comes after monthly inflation \u2013 which Milei has vowed to bring below one percent\u00a0later this year \u2013\u00a0accelerated for a fourth consecutive time in December to 2.8 percent, led by transportation, utilities and food prices. Sticky inflation also risks bleeding through to the currency, which floats freely within an upper and lower bound determined, as of January, by monthly inflation. Higher price gains translate to bands widening at a faster pace.<\/p>\n
On Friday, the government authorised a partial increase on petrol and diesel taxes, as well as natural gas and electricity price hikes, effective February 1. Services, like utilities and rent, weigh more heavily in the new inflation methodology, which goes into effect this month.<\/p>\n
The Central Bank also says Argentina will have to make deeper budget cuts in 2026 than those outlined in the newly passed budget because the government was unable to veto university and disability funding increases passed by Congress last year. The government will have to cut more spending, equivalent to about 0.5 percent of gross domestic product, in areas like salaries, subsidies and social welfare, according to the monetary authority. \u00a0<\/p>\n
Revenue for social welfare, meanwhile, is set to drop if Milei passes the labor reform set to wind its way through Congress next month, according to the report. The reform could have a fiscal cost of between 0.7 percent\u00a0and 0.8 percent\u00a0of GDP, according to a separate research note published Thursday by JPMorgan Chase & Co. The fall in revenue corresponds to less social security contributions and some tax cuts. That\u2019s expected to be reversed in the medium term, as formal employment \u2013\u00a0and therefore the tax base \u2013\u00a0grows.<\/p>\n
Annual inflation is still expected to drop to 20 percent this year from about 32 percent currently, according to economists surveyed by the Central Bank.<\/p>\n
by Manuela Tobias, Bloomberg<\/p>\n
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