Inflation in Argentina is at 2.5%, while the crawling peg of 2% is acting as a factor increasing inflation, according to a specialist. With the decrease in inflation, the devaluation rate is also expected to drop, which could reflect a positive advance in the fight against inflation in the short term.
Economist Enrique Szewach referred to President Javier Milei's announcement regarding the possible decrease in the devaluation of the peso from 2% to 1% if inflation continues to decline. According to Szewach, subtracting induced inflation, the monetary inflation would be 0.2% monthly. This measure could be implemented if inflation remains on the decline in the coming months.
In a context of inflationary deceleration, Milei indicated that the Central Bank could reduce the crawling peg to 1% monthly in early 2025 if the inflationary trend continues. Additionally, the possible exit from the currency control announced by Milei could be postponed until 2025.
Esteban Domecq, director of the consulting firm Invecq, agreed with this view and opined that the devaluation rate should decrease if inflation continues to fall. Domecq also mentioned that keeping the dollar with a 2% monthly increase loses meaning if inflation approaches the same percentage.
Szewach warned about the consequences of Argentina becoming expensive in dollars, which would complicate exports and tourism. On the other hand, he mentioned that the reduction in the crawling peg rate could positively affect inflation by decreasing the prices of dollar-related goods, such as food and other imported products.
Finally, he stated that a reduction in the pace of peso depreciation could impact the official exchange rate and generate effects on inflation, especially in services that have seen the sharpest increases in recent months.
