Fynsa
It's not that we were expecting much news, but I know that, secretly, all the authorities and those of us who follow the numbers wanted inflation to come out lower. We wanted it to surprise us, even if only slightly, by going down, and for this whole inflationary spiral to start to ease up.
That was not the case.
The CPI for August rose 1.2% compared to the previous month, which, for a change, was above our expectations and any version of market expectations that readers may have. As a result, the price index has accumulated a increase of 14.1% over twelve months, the highest variation in the last... thirty years. Although almost all divisions show significant increases, Food and Transportation stand out the most, with increases of 21.7% and 27.8%, respectively. Currency depreciation, rising international food and energy prices, and global logistical difficulties have been behind the most recent price increases, which, together with local factors associated with last year's and early this year's consumption boom, formed a toxic cocktail that has been more difficult to combat than previously thought.
To make matters worse, the situation is unlikely to improve in the coming months. Deep down, I hope I am profoundly wrong, but it is difficult to ignore the evidence. September is a seasonally inflationary month, due to the national holiday celebrations, which are concentrated precisely in the divisions that have been hardest hit. Despite this, thanks to some respite in oil prices, the estimated variation does not exceed the actual figure for August, with projections slightly above 1.0%. Then, October, a month that for some years now, and even more so since the change in the basket in 2019, has also shown high seasonality. Second-round effects and exchange rate pass-through would still play a role, so there is no reason to be overly optimistic.
Therefore, the key months would be November and December. Not only are these months characterized by low seasonality, but we could also begin to see more direct effects of oil prices that (we hope) will not continue to rise, less pressure from the exchange rate, and a slowdown in activity that would already be impacting the possibility of passing on costs to final prices. In fact, whether higher or lower, the market, the Central Bank, and we estimate that these months would show lower inflation levels than those seen since at least March. These signs will be vital, not to shore up year-end projections, but to slowly begin to moderate those toward 2023. The Central Bank and we are on that path, but the market still needs evidence to believe. We shall see.
