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 in lower. We wanted it to surprise us—even if just a little—on the low side, and for this whole inflationary spiral to start easing up.
That wasn't the case.
The CPI for August rose 1.2% from the previous month, which, as usual, came in above our expectations and any version of market expectations the reader might prefer. As a result, the price index has accumulated a 14.1% increase over the past twelve months—the highest rate in the last… thirty years. Although nearly all categories show significant increases, Food and Transportation that stand out the most, with increases of 21.7% and 27.8%, respectively. Currency depreciation, rising international food and energy prices, along with global logistical challenges, have driven the most recent price surge. Combined with local factors linked to the consumption boom of last year and early this year, these elements have created a toxic cocktail that has proven more difficult to combat than previously thought.
As if that weren't enough, the situation isn't likely to improve in the coming months. Deep down, I hope I’m completely wrong, but it’s hard to ignore the evidence. September is a seasonally inflationary month due to national holiday celebrations, which disproportionately affect the regions that have been hardest hit. Despite this, thanks to some relief provided by the price of oil, the estimated change does not exceed August’s actual figure, with projections slightly above 1.0%. Then there’s October, a month that for several years now—and even more so since the basket of goods was revised in 2019—has also shown high seasonality. Second-round effects and exchange rate pass-through would still play a role, so we shouldn’t get our hopes up too much.
Therefore, the key months would be November and December. Not only are these months characterized by low seasonality, but we may 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 economic activity that is already affecting the ability to pass on costs to final prices. In fact, whether prices are higher or lower, the market, the Central Bank, and we expect these months to show lower inflation levels than those seen since at least March. These signals will be vital—not to reinforce year-end projections, but to slowly begin moderating them toward 2023. The Central Bank and we are on that side of the fence; the market still needs evidence to be convinced. We’ll see.
