LDN - Business

As Argentine inflation cools to single digits, residents are still skeptical

[July 12, 2024] By Miguel Lo Bianco and Noelle Harff

BUENOS AIRES (Reuters) - Argentines say they are yet to feel the benefits of cooling inflation and analysts predict the five-month streak could end when official figures for June are released on Friday.

Since President Javier Milei took power late last year, inflation has slowed dramatically in Argentina, decelerating from 25.5% in December to 4.2% in May.

The sharp fall has been attributed to a suite of cost-cutting and austerity measures that have put a lid on consumer demand, as well as measures to reduce money printing.

A Reuters poll forecast a change in direction for inflation in June, with a median estimate of 5.1%, although on Thursday Milei's Economy Minister, Luis Caputo, said he expected June inflation below 5%.

For many Argentines, the slowdown has not been enough to fend off the pain of high utility, transport and food prices in a country where the monthly minimum wage of 234,315 pesos ($260) has failed to keep up with annual inflation of nearly 300%.

"I don't think (inflation) goes hand-in-hand with salary increases and taxes," said Gustavo Garcia, a 47-year-old hairdresser who was out hunting for bargains at the central market in Buenos Aires.

"The day-to-day inflation is much more than 4% or 5%," Garcia said, expressing skepticism about how the official figures were calculated.

Milei, a free-market economist, ended the previous Peronist government's price freeze on numerous public services and says that tough fiscal medicine is necessary to revive the economy. The minimum bus fare in Buenos Aires has soared by over 400% since Milei took office.

At the market, Isidoro Recalde, 67, said the fare increases were necessary and supported the government's plan.

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A greengrocer counts Argentine peso bills at a local market,as Argentina is due to release consumer inflation data for April, in Buenos Aires, Argentina May 11, 2024. REUTERS/Irina Dambrauskas/File Photo

"What we paid before was insignificant," Recalde said. "Let's be realistic. On a day-to-day basis things are complicated, but we have to move forward."

Argentina's government has touted its success taming triple-digit inflation and the boost to the state's finances by Milei's spending cuts.

"Lowering inflation means protecting those who have the least," the economy minister told reporters earlier this week. "(Inflation) is the worst tax on the poor," Caputo said.

But inflation is still among the highest in the world, while a recession continues to hit consumers hard and poverty is nearing 60%. People are being squeezed hard, with major job losses in sectors such as construction.

"Every day there are new prices, it is not that (inflation) is stopping," said Emilia, a 65-year-old resident who was also out shopping and did not want to reveal her last name. "It is a lie that prices are going down," she said.

Argentina's national INDEC statistics agency - which is generally trusted by analysts, following an overhaul in 2016 - is set to release its inflation data on Friday at 1900 GMT.

(Reporting by Miguel Lo Bianco, Claudia Martini and Noelle Harff. Editing by Lucinda Elliott and Rosalba O'Brien)

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