Macroeconomic Forecast Argentina

July 2006 | Macroeconomic Forecasts

Price control agreements with the private sector continue to put the brakes on inflation. In June, inflation stood at 11% y-o-y (a 0.5% m-o-m increase); this was down from 11.5% y-o-y in May and 12.3% year-end in 2005. Nevertheless, these unorthodox policies do not address the root causes of inflationary pressure: a cocktail of above-trend growth, loose fiscal policy, capacity constraints (due to investment shortfalls) and central bank intervention. Although prices have gradually come down, we maintain our 2006 forecast of 11% y-o-y. Core inflation measures remain well above headline data (at 12.2% y-o-y).

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