Argentina | Inflation reduction consolidates: It was 1.5% m/m in May, lowest in five years

Summary

May’s inflation was 1.5% m/m (43.5% y/y), well below expectations (CB-consensus: 2.1% m/m, BBVAe: 1.9% m/m). Core inflation fell to 2.2% m/m in May.

Key points

• Key points:
• The successful easing of the FX restrictions without an exchange rate disruption deactivated the devaluation outlook, which contributed to anchor down the inflation expectations of price makers and made it possible to break the 2% m/m floor for the first time in more than four years.
• After the release of March’s inflation (3.7% m/m) and the announcement of the new program with the IMF, which incorporated a new exchange rate regime, we decided to raise the inflation forecast for 2025 from 30% to 35%. Given that the transition has been much smoother than expected we return to our previous scenario, with an inflation projection of 30% y/y for 2025.

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