The CPIs for Greater Buenos Aires, for the City of Buenos Aires, and for Córdoba were published by the National Institute of Statistics and Censuses (Instituto Nacional de Estadística y Censos, INDEC), the City of Buenos Aires, and the province of Córdoba, respectively, last week. The results of the last few months were as follows:
| August | September | October | Average | ||
|---|---|---|---|---|---|
| Greater Buenos Aires | Headline | 0,2 | 1,1 | 2,4 | 1,2 |
| Core | 1.7 | 1.5 | 1.8 | 1.7 | |
| Autonomous City of Buenos Aires | Headline | -0,8 | 1,3 | 2,9 | 1,1 |
| Core | 1.6 | 1.5 | 2.0 | 1.7 | |
| CÓRDOBA | Headline | 0,3 | 1,8 | 2,2 | 1,4 |
| Core | 1.6 | 2.0 | 1.7 | 1.8 |
The relatively low headline records in August and high in October reflect a reversal in the increase in the price of gas in that month and the subsequent increase in October. The BCRA had announced at the presentation of the Monetary Policy Report on October 18 that in order to assess its inflation target for the last quarter—set before the court decision that led to the tariff changes—it would calculate an average of the August-October inflation rate for October, which includes both the fall and the rise in gas prices. This is a revision with offsetting biases: the increase in tariffs was lower than the reduction; however, the inclusion of August and September incorporates months prior to those initially expected, and therefore inflation tends to be higher given the disinflationary path. This calculation leads to a monthly figure of 1.2%, which indicates that the BCRA is well positioned to achieve its inflation target of 1.5% or less per month in the last quarter.
In October, the evolution of core inflation was uneven across jurisdictions, although in Greater Buenos Aires it was influenced by components related to the increase in tariffs.
In recent weeks, the BCRA has kept a conservative approach to prevent October’s inflation from being passed on to expectations. Estimates and high-frequency indicators from public and private sources monitored by the BCRA suggest, for November, an evolution that is in line with the disinflation path set by the monetary authority.
Last week, most of the world’s currencies depreciated against the dollar as a result of the elections in the United States. The depreciation of the peso against the dollar in this context is not inflationary, but merely counteracts the deflationary pressures associated with such depreciations. This type of dynamic is precisely how flexible exchange rate regimes work to automatically cushion external shocks.
Considering both domestic and external factors, the BCRA decided to reduce the 35-day LEBAC rate and the center of the repo corridor by 50 basis points, which reached 25.75%.
The BCRA will continue to monitor events in the markets over the next few weeks. The BCRA will continue to take anti-inflationary measures to ensure a sustained disinflationary process to achieve the objective for this year (1.5% monthly inflation rate or lower in the last quarter), and a decreasing trend of inflation expectations for 2017.
