Argentina inflation hits lowest level since mid-2020

Inflation in Argentina reached its lowest level since President Javier Milei took office and annual consumer prices dipped below 100 percent for the first time in two years as he continues to tame expectations in the crisis-prone economy.

Consumer prices rose 2.2 percent in January, compared with the 2.3 percent median estimate of economists surveyed by Bloomberg, the lowest since July 2020. Annual inflation slowed to 84.5 percent, according to government data published Thursday.

Monthly inflation has been falling steadily since hitting a three-decade high of 25.5 percent in December 2023 as Milei has taken an axe to a bloated government budget and chipped away at taxes. Since the abrupt currency devaluation in December 2023 that had an outsize impact on annual inflation, Milei has carefully managed the peso’s monthly devaluation to limit its effect on prices.

Restaurants and hotels led price increases, followed by housing and utilities.

In January, Milei removed a key tax on US dollar purchases, relieving some pressure on the prices of imported goods and services. This month, the government slowed the peso’s monthly depreciation to one percent from two percent, which economists believed had become a floor for some prices. The Central Bank cut rates by 300 basis points to 29 percent on January 30 on reduced inflation expectations, dramatically down from 133 percent when Milei took office.

Economy Minister Luis Caputo said in a recent interview he hopes the monthly inflation rate will dip below two percent starting in February, following the adjustment to the currency peg. Slowing inflation is the biggest factor buoying Milei’s continued popularity.

Economists surveyed by Argentina’s Central Bank expect year-on-year inflation to plunge to 23 percent this year, while the government predicted 18 percent in its 2025 budget.