Consumer prices in greater Buenos Aires rose 2.4 percent in October over the previous month, Argentina’s official Indec statistics agency said on Thursday, as subsidies for natural gas for home-heating expired, sending prices soaring. The reading marked a sharp increase in inflation over the prior two months but was in line with a Reuters poll showing expectations for 2.5 percent inflation in October. It was well above the central bank’s target for 1.5 percent average monthly inflation for the final three months of 2016.
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Consumer prices in Latin America’s No. 3 economy had risen 1.1 percent in September and 0.2 percent in August, according to official data for the Buenos Aires metropolitan area.
Argentina does not publish countrywide inflation data, but consumer prices for the greater Buenos Aires area are used as a proxy. President Mauricio Macri revamped Indec after taking office 11 months ago due to widespread allegations of manipulation by the previous administration. Indec resumed publishing inflation data in June.
The low August and September inflation readings were largely due to a court ruling that forced the government to restore home-heating natural gas subsidies until public hearings could be held.
The subsidy cut, a major part of Macri’s deficit reduction program, were reinstated in October, resulting in price hikes of between 300 percent and 400 percent.
That contributed to October’s high reading, meaning inflation will likely be slower in the coming months, said Fausto Spotorno, chief economist at Orlando Ferreres & Asociados. This should make the central bank’s 1.5 percent average monthly target for the final quarter possible, he said.
“I see it as very achievable,” Spotorno said of the target, noting that the high October reading was “a result of the Supreme Court ruling, and there are no secondary effects.”
Economists see inflation at 39.4 percent in 2016 and 19.7 percent in 2017, though the central bank is targeting a range between 12 percent and 17 percent next year.
The monetary authority lowered interest rates by 50 basis points to 26.25 percent on Tuesday, after holding rates steady for six weeks as market expectations for 2017 inflation remained above its target.
Speaking at a bankers’ conference this week, Finance Minister Alfonso Prat-Gay pointed to signs inflation was slowing, noting that private estimates showed average monthly inflation between August and October at 1.3 percent.
On an annualized basis, that would be below the government’s own expectation for 17 percent inflation in 2017.