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September witnesses highest inflation recorded in single month since 1991

According to a report published by the National Institute of Statistics and Census of Argentina (INDEC) on October 17, September witnessed the highest inflation recorded in a single month since 1991, increasing 6,5% next to August, which in turn soared 3,9% next to July. Government sources attribute this increase to rising energy and food prices, which have reportedly climbed 7% in recent weeks. Financial analysts cited by reports forecast that inflation in October will grow 5%. While the INDEC expects the annual inflation to reach 44%, independent consultants suggest the number will more likely reach 47%.

The government is attempting to lower inflation by reducing public spending and increasing interest rates in pesos (ARG) to lower the overall demand for dollars in the streets, which is partly responsible for the devaluation of the national currency. In this context, in late September the Central Bank raised interests’ rates from 60% to 65%, the highest offered by any country in the world, further encouraging banks to offer high interests’ rates for fixed-term deposits. Even though inflation is expected to slow down in the following months, the economy will most likely continue its downward trend. This is attributed to the government’s inability to curb the devaluation of the ARG, translating in surging prices for imported productive assets required by industrialists, and higher transportation prices which subsequently have a negative impact in consumer goods. In this context, it will be increasingly difficult for business to meet the salary expectations of workers and employees. With unions demanding up to 40% increases in wages, this situation will most likely continue to prompt large demonstrations in central Buenos Aires, further undermining the government’s popularity.

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