Argentina's Monthly Inflation Drops to 2.7%

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Facts

  • Argentina's monthly consumer inflation fell from 3.5% in September to 2.7% in October — its lowest level since November 2021. The annual rate also slipped below 200% for the first time since last November, according to data from the Instituto Nacional de Estadística y Censos.[1][2]
  • The economy ministry said the figures, published Tuesday, are "consistent with a deepening [of] the disinflation process." Consumer prices in Argentina reportedly rose 107% in the first 10 months of the year and have risen 193% over the past 12 months.[3][4]
  • Pres. Javier Milei said that, if inflation stayed constant in November and December, he would slow the central bank's monthly currency devaluation from 2% to 1%. Analysts had reportedly pegged the monthly November inflation at 2.9% last week.[5][6]
  • Milei's term began in December 2023 with monthly inflation at 25.5%. Argentina has since witnessed six straight months of a rise in inflation-adjusted wages and a successful tax amnesty program that brought over $20B into the country.[7][8]
  • Milei's government introduced radical economic reforms in Argentina this past year, including ending huge energy subsidies, which have reportedly drastically reduced consumption. The country, however, remains in deep recession, and its economy is set to contract by 3.5% this year.[4][9]
  • Argentina's forex reserves stand at a negative $5B. Its basic goods prices are higher in comparison to countries where minimum wages are higher than its own. Yet, last week, Milei said that the nation was "emerging from the desert" and beginning to grow again.[3][8]

Sources: [1]Trading Economics, [2]Reuters (a), [3]Buenos Aires Herald, [4]Report News Agency, [5]Bloomberg, [6]Reuters (b), [7]Buenos Aires Times, [8]Macau Business and [9]Independent.

Narratives

  • Establishment-critical narrative, as provided by Eurasia Review. Despite inheriting an economy ravaged by 211% inflation, Pres. Milei's bold "shock therapy" is bearing fruit in Argentina. His uncompromising focus on balancing budgets and ending money printing has driven inflation down dramatically. While the path has been painful, with necessary recession and spending cuts, the strategy's success is evident in renewed mortgage lending and surprising economic growth.
  • Pro-establishment narrative, as provided by Economics Observatory and Bloomberg. Argentina's economic challenges lie beyond just inflation. These include deep-seated fiscal deficits, repeated debt defaults, and a reliance on currency controls that distort trade and investment, and increase poverty. Milei is addressing these issues by cutting subsidies and public spending, yet these austerity measures risk public backlash and economic contraction. Structural reforms and eventual dollarization are Milei's goals, but they require cautious navigation.