Argentina’s inflation has decreased to its lowest since mid-2020, with January’s consumer price increase at 2.2%. Annual inflation fell to 84.5%, and policymakers aim for continued declines. Strategic tax removals and adjustments to currency management are key factors in controlling inflation rates, benefitting President Javier Milei’s economic strategies.
Argentina has reported its lowest inflation levels since mid-2020, achieving a significant reduction as annual consumer prices fell below 100 percent for the first time in two years under President Javier Milei. In January, consumer prices increased by just 2.2 percent, slightly below the 2.3 percent forecast by Bloomberg economists, marking the lowest rise since July 2020. Annual inflation decreased to 84.5 percent, as per the latest government statistics.
Since reaching a record high of 25.5 percent in December 2023, monthly inflation has shown a consistent decline. This drop follows aggressive measures taken by Milei to rein in government expenditures and manage tax burdens. Additionally, following a sharp currency devaluation in December 2023, the government has since moderated the peso’s monthly depreciation to mitigate its inflationary impact.
Price increases were primarily driven by the food and hospitality sectors, alongside housing and utility costs. In a strategic move, Milei eliminated a significant tax on dollar purchases in January, easing some cost pressures on imports. The government also adjusted the peso’s monthly depreciation from a previous rate of two percent down to one percent this month, aiming to stabilize prices further.
On January 30, the Central Bank implemented a drastic rate cut of 300 basis points to bring the interest rate down to 29 percent, a sharp decline from 133 percent at the beginning of Milei’s tenure. Economy Minister Luis Caputo expressed optimism that monthly inflation could drop below two percent in February, reflecting adjustments to the currency peg. The decline in inflation levels has significantly contributed to Milei’s popularity.
Economists from Argentina’s Central Bank forecast a reduction in year-on-year inflation to 23 percent for this year, while government projections estimated it at 18 percent in the 2025 budget. This shift indicates a potential for improved economic stability and consumer confidence following Milei’s fiscal reforms.
Argentina’s inflation rate is witnessing a substantial reduction, reaching its lowest levels since 2020. The government’s financial strategies, including cuts to spending and tax adjustments, alongside changes in monetary policy, are yielding positive results. Economists predict further drops in inflation, which may bolster President Milei’s popularity and support ongoing economic recovery efforts.
Original Source: www.batimes.com.ar
