Argentina inflation tops 160pc, as minister warns of escalating rate
Business
The monthly inflation was rate 12.8pc in November alone
BUENOS AIRES (Reuters) – Argentina's annual inflation rate hit 161 per cent in November, faster than expected and the highest monthly figure this year, laying bare the daunting challenges new President Javier Milei faces in navigating the country's turbulent economic waters.
The data is the first inflation readout since Milei took office last Sunday, promising to right Argentina's flailing economy, including sky-high consumer prices that have sapped residents' purchasing power and fuelled rising poverty.
Inflation is expected to climb faster in the months ahead after Milei's government devalued the peso over 50pc this week, part of a wider shock package he hopes will eventually stabilize the economy that's mired in its worst crisis in decades.
"This skyrocketing inflation is going to be tough for people," said 46-year-old bricklayer Eduardo Casado as he worked in a home in Buenos Aires on Wednesday.
"Last week I bought two kilos of potatoes for 800 pesos and this week it cost almost 1,200 pesos. I don't know if next week we'll be able to afford to buy the same groceries."
The monthly inflation was rate 12.8pc in November alone, statistics agency INDEC said on Wednesday, above a Reuters poll that had expected an 11.8pc monthly bump. That was a steep jump from an 8.3pc rise in October.
Milei took office promising a sharp, painful fiscal shock to fix Argentina's economic crisis, and on Tuesday his government announced an initial policy push that includes a more than 50pc devaluation of the local peso currency plus sharp spending cuts.
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Those measures, however, could supercharge inflation even higher in the near-term, with Milei having warned of tough times ahead and monthly inflation of 20-40pc in the months ahead.
Latin America's No 3 economy has been battling a prolonged economic crisis that has steadily eroded the value of the local currency while plunging two-fifths of the population into poverty.
Casado, the bricklayer, said work was complex because prices of materials were constantly changing and it was hard to get by.
"It's been a while since we've been making ends meet," he said, adding though that he was supportive - for now - of the government's austerity measures, which he hoped could help.
"I want to believe prices are going to slow down at some point."
BRACE FOR 'SUBSTANTIALLY HIGHER' RATE IN DECEMBER
Argentina's December inflation rate will "clearly be substantially higher than in November," Economy Minister Luis Caputo said in a televised interview on Wednesday.
On Tuesday, Caputo announced a slate of economic measures including a more than 50pc devaluation of the peso to 800 per US dollar and energy and transportation subsidy cuts.
The energy subsidy cuts could start in February or March next year, Caputo said in the interview with local television channel Todo Noticias.
Markets cautiously welcomed the "shock" measures, as Argentina's country risk edged down and the gap narrowed between the official peso exchange rate and its alternatives.
Caputo described the market reaction as "an enormous vote of confidence."
Libertarian Milei warned in his Sunday inauguration speech that a monthly inflation rate of 20pc to 40pc was expected from December to February.
Caputo said the government was working to overhaul the IMF agreement, as the previous administration had missed the loan's mandated targets.
He added that Argentina would make its payment due to the IMF on Dec. 21, when, according to the fund, the country owes about $913 million.
He did not specify how Argentina would meet the deadline. The country has previously tapped a currency swap with China's central bank and a loan from Qatar to pay the IMF.
"We're doing things right," Caputo said. "A credible fiscal anchor, plus what we're doing to the exchange rate and what the central bank announced, will stabilize (the economy)."
Argentina's central bank early Wednesday held its benchmark interest rate at 133pc and imposed a "crawling peg" to weaken the peso by 2pc monthly.
