Prices in Argentina increased by 1.5% in May, the lowest monthly inflation rate since May 2020, when the country’s economic activity came to a sudden halt due to the COVID-19 pandemic. 

The year-on-year inflation rate was 43.5%, according to a report published on Wednesday by the government’s statistics institute, the INDEC. The accumulated inflation rate for the first five months of the year was 13.3%.

Economy Minister Luis Caputo celebrated the figures in a post on X. “Without [currency controls], correcting relative prices and with the economy growing at 6% per year,” he wrote. “We have the best president in the world.”

Prices that are regulated by the government, such as utilities and fuel, increased by 1.3%, while those affected by seasonal changes, like some vegetables, fell by 2.7%. Core inflation, goods and services that are not regulated or seasonal, rose by 2.2%, unable to pierce the 2% floor.

The sector with the highest increase was communications, due to hikes in telephone and internet services. It was followed by restaurants and hotels, with a 3% increase. Foods and non-alcoholic beverages rose by 0.5%.

A report by the EPyCA consulting firm said that this year, Argentina is on its way to a 25% year-on-year inflation, the lowest since 2018. However, they added that whether this comes to fruition depends on President Javier Milei sustaining the current economic policy, and warned of risks concerning the exchange rate and economic activity.

Florencia Fiorentin, chief economist at EPyCA, said that the disinflationary policy is based on exchange rate appreciation and frozen wages as price anchors.

“That reduces the level of activity for two reasons that feed back on each other: demand goes down, and it goes down due to a real fall in wages and the relative cheapening of the prices of imported goods,” she said. 

Fiorentin explained that the trade surplus is falling, and that the decreasing foreign currency inflow “threatens the exchange rate appreciation” as it could “push for devaluation.” She added, “the decrease in real wages increases social conflict.”

The Institute of Statistics and Social and Economic Trends (IETSE, by its Spanish initials) celebrated the number in a recent report, but said that “this encouraging data coexists with a worrisome social reality.” The institute, associated with Córdoba’s grocers association, conducted household surveys that showed that “consumption continues to stagnate and that the purchasing power of families has not been able to recover.” 

“More than half of the households surveyed cannot adequately cover the basic food basket, and almost 90% need to finance their food with credit cards, loans, borrowed money, or depend on state assistance,” the report said. “We consider that the immediate and urgent challenge is rebuilding families’ real income and purchasing power — a palpable recovery of social welfare must unfailingly accompany price stability.”