Ideas de Peso | Inflation: A tale of two half-years

We invite you to read the new article on Ideas de Peso, a blog where economists working at the BCRA share their opinions:

Between December 2017 and March 2018 core inflation was less sensitive to regulated price shocks and exchange rate shocks than in the past. The regulated subindex of the national CPI recorded a cumulative increase of 19.1% in that period, with sharp rises in gas and electricity prices. Additionally, there was a rapid and marked depreciation of the multilateral nominal exchange rate, which accumulated a 15% increase in two months.

The rises observed in regulated goods and services have a direct and indirect impact on core inflation. The direct impact comes from including some public utilities for calculating the indexes of certain products used to measure core inflation. For example, monthly maintenance fees include common expenses for gas, electricity and water supply. The indirect impact is rooted in cost pressures caused by the increase in regulated prices in relation to other goods and services of the economy. In turn, the exchange rate exerts a more direct impact on goods because its tradable component has a major effect on prices.

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April 11th, 2018

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