Argentina’s monthly inflation rate reached 20.6% in January 2024, according to the National Institute for Statistics and Census (INDEC, for its Spanish acronym). The figure, which was 4.9 points lower than the month before, reflects the fallout of President Javier Milei’s 54% devaluation of the peso on December 12.

Interannual inflation hit 254.4%. The category that saw the biggest monthly increase is “other goods and services,” which went up by 44.4%. The category is a miscellaneous division that includes personal care, prostitution, social protection, insurance, jewelry, and financial services, among others.

It was followed by transportation, which went up by 26.3% mainly due to increases in public transportation and fuel. The category that saw the third highest increase was communication, with a 25.1% driven by the rise in telephone and internet services.

Due to its weight in the index, the division with the highest influence on the rate was food and non-alcoholic beverages, which increased by 20.4% mainly due to meat, bread, and cereal prices.

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Paula Gándara, chief information officer of Asset Management at Adcap Grupo Financiero, said that January’s inflation figure was in line with expectations. “Today, expectations are around 15% for February and 10% for March,” she said in a statement sent to media outlets.

In a press release, the Economy Ministry said that January’s number confirms a “deceleration path” and that the devaluation’s pass-through to prices was lower than expected. “The combination of fiscal, monetary, and exchange rate anchors and the normalization of foreign trade ensure a declining inflationary trajectory,” the communiqué said.

A report by the Ecolatina consulting firm contends that a strong recession will continue to deteriorate Argentines’ purchasing power over the summer. The consultancy estimates that inflation will surpass salaries by more than 10% until March, but that is only an average — informal workers will take the worst part of the economic ordeal as they do not have collective bargaining. 

“In a scenario where social assistance will be conditioned by the government’s fiscal objectives, it is likely that difficulties will not take long to appear for this sector of society,” the report said.

Milei took office with a strong reform mandate, and he started his tenure by devaluing the peso and eliminating a variety of price controls and regulations. The International Monetary Fund (IMF) said that inflation would be high during the first months of the austerity program. However, the Fund’s chief economist, Pierre-Olivier Gourinchas, said in a press conference that inflation would decrease to “single digits by the middle of this year” and could fall “even further.”

The IMF calculated that the 2024 inflation rate will be around 150% and that the country’s GDP will fall by 2.8 percentage points. In turn, according to a February report by the Organization for Economic Co-operation and Development (OECD) prices in Argentina to soar by 250.6% in 2024. The economy is also expected to shrink by 2.3% before rebounding by 2.6% in 2025.

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