In Win For Milei, inflation in Argentina falls to 2021 levels

(Bloomberg) — Argentina's monthly inflation hit its lowest level since late 2021, a significant victory for President Javier Milei, who is making curbing spiraling prices a centerpiece of his government.

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Consumer prices rose 3.5% in September from August, below the average forecast of 3.6% among economists surveyed by Bloomberg. Annual inflation slowed to 209%, according to government data released on Thursday. Inflation has been around 4% since May.

Housing and utilities led the monthly price increases, followed by clothing and education.

“Inflation was fairly balanced across the country and core inflation declined, which is a positive data point that obviously breaks the 4 percent barrier,” said Maria Castiglioni, director of consultancy C&T Asesores in Buenos Aires.

In September, Milei cut the country's main import tax from 17.5% to 7.5%, while narrowing the gap between the official exchange rate and the parallel rate, which also affects prices. Milei has announced that it will completely eliminate the import tax by the end of the year. He insisted this week that capital controls and the peso's 2% monthly devaluation rate will remain in place, which also helps keep inflation under control.

Meanwhile, Milei continued its subsidy cuts. Train fares rose nearly 40% last month, with the minimum fare increasing from 200 to 280 pesos. Water, gas and electricity prices all rose about 4% as the president also scaled back long-standing government aid, with gas prices also rising slightly.

Milei's winning streak is expected to continue. Economists predict annual inflation will fall sharply to 40.9% in the next 12 months, according to a monthly survey by the country's central bank. The central bank's survey, released on October 4, shows that economists expect annual inflation to fall to 123.6% by the end of 2024.

(Updates with report breakdown in third, comment in fourth paragraph)

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