Argentina inflation picks up more than expected before IMF deal

Argentina’s inflation last month jumped the most since August amid increased currency volatility in the run-up to an expected vote on a fresh financing package from the International Monetary Fund.

Consumer prices rose 3.7 percent from February, surpassing the 2.7 percent median estimate of analysts surveyed by Bloomberg. The previous monthly inflation print came in at 2.4 percent. Annual inflation slowed to 55.9 percent, according to government data published Friday.

Food and beverages led price increases, followed by education as kids returned to school. President Javier Milei said recently he only expects inflation to fall below two percent in May or June, blaming the sticky inflation on political volatility.

“This is a surprise even for the government, especially because food correlates with the exchange rate, which today is our nominal anchor,” said Eduardo Levy Yeyati, chief economic advisor at Adcap Grupo Financiero, a local brokerage. “It adds more reasons in favour of a change in the monetary and FX framework that the market is expecting.”

Later today, the IMF is expected to vote on a US$20-billion package for Argentina that has had local traders on edge about the future of the country’s currency policy. Uncertainty fed into a widening gap between the official exchange rate, which the Central Bank manages, and the parallel peso.

The Central Bank slowed down its monthly depreciation of the official peso to one percent from two percent in February, a move aimed at further cooling inflation but that many traders expect to end as a condition of the deal.

The economy has been showing consistent signs of gaining momentum after a deep slump. Economic activity rose 0.6 percent in January, beating expectations for the fourth month in a row. In the second half of 2024, poverty fell sharply to about 38 percent from a more than two-decade high of 53 percent the previous six months.