In his first statements as president-elect, Javier Milei assured that lowering the inflation “at international levels It will take between 18 and 24 months”. For now, the base scenario for his first months in office seems to meet the conditions for the variation of the CPI to present increases of more than 10%.
The inertia and the seasonalityadded to an update in the rates of the public servicesthe correction of official dollar and a possible jump in alternative exchange rates will add pressure to inflation in the coming months. The specific number will depend on the intensity and the moment in which these variables are adjusted.
In fact, The correction of the official dollar and the update of rates or fuels may be part of the transition agenda that Sergio Massa’s team and Milei’s team must carry out before December 10. Movements that, sooner or later, will surely have an impact on prices.
“The first months of 2024 will probably see higher inflation than the current one. The current scheme of price controls and distortions hides inflation under the rug and is not sustainable. Inescapably, some type of normalization will have to be done. “It is the minimum that is needed to begin to solve the problems of production, investment and shortages that we are experiencing and for the economy to get some air after a very bad 2023,” Eugenio Marí, Chief Economist of the Libertad y Fundación, told Ámbito. Progress.
“But how to make this transition is not trivial. If it is done with patches, leaving the stocks in force, maintaining price controls and without making a real change in economic direction, then credibility will not be recovered.. The demand for pesos will remain close to current levels, which are historical lows, and consequently there will not be a sustained drop in inflation,” the economist noted.
And he highlighted: “On the other hand, if fundamental reforms are carried out, public accounts are balanced, the monetary regime is reformed to eliminate the possibility of financing spending with issuance, the exchange market is unified and foreign trade is normalized, then the path can be very different. The economy will have an initial inflationary acceleration, equivalent to the inflation that is under the carpet today, but there will be an improvement in expectations; The demand for pesos will begin to recover and there will be greater liquidation of exports and capital inflows. With this, we will be able to enter the second half of 2024 with inflation falling sharply and sustainably.”
For his part, Camilo Tiscornia pointed out that in the coming months “inflation data is going to be higher” in relation to what was observed in October (8.3%). “First, for a seasonal issue: December is always one of the highest months of the year in terms of inflation and this year it will not be the difference. To this will be added the fruits of any correction that is attempted. Surely the effect will begin to be seen even in November and we are going to see a very busy summer,” she explained.
The economist highlighted that surely It will be a summer “of high inflation”, although it is difficult to predict a number: “Because it will depend on the intensity of the changes and when they are made. So far, November comes with inflation close to 11% and I think it will be from there onwards in the coming months.”
Inflation: what to expect in the coming months
Inertia, in itself, leaves a high floor. “The cruising speed of the economy is increasing. It is likely that by the end of the year we will return to a monthly inflation similar to what was experienced in August and September (12.4% and 12.7% respectively),” explained Francisco Ritorto, from the ACM consulting firm.
«Besides, there is a distortion of relative prices that intensifies with the passage of time. Regulated prices were once again contained compared to the rest of the products, which translates into more inflation going forward,” said the economist, who highlighted: “In other words, the inflationary inertia itself, together with the delay in some regulated prices, will bring a monthly variation that continues with a high floor.”
“There is no doubt that the inflation floor for the coming months will be high. Estimated around 10% for the next six months. This is explained by the strong inertia, the parities that are at these levels and the interest rates,” explained Juan Manuel Telechea, director of the Institute of Labor and Economy (ITE) of the Germán Abdala Foundation, who concluded: “ That would be the base scenario: after Milei’s victory, it is likely that there will be very strong pressure on the exchange market, so if there is a devaluation of the exchange rate, that also adds more pressure to prices.» .