The province of San Luis released its inflation rate last week. The monthly headline inflation dropped from 2.3% in July to 0.6% in August, mainly exacerbated by a reversal in the price of gas. Although high-frequency indicators monitored by the BCRA exhibited a heterogeneous performance, now they flag signs of recovery in line with the disinflation path set by the monetary authority for the following months.
This week, the BCRA launched the inflation targeting regime. The annual inflation target for 2017 is between 12% and 17%; for 2018, between 8% and 12%; and for 2019, 5%. In all cases, they mean the headline inflation for the index with the widest geographical range published by the National Institute of Statistics and Censuses (Instituto Nacional de Estadísticas y Censos, INDEC), which is currently the CPI for Greater Buenos Aires. In addition, the monthly intermediate inflation target of 1.5% or less has been set for the last quarter.
There has been a clear disinflation process in the past few months. However, inflation expectations for 2017 reflected in August’s Market Expectations Survey are still above the target band established.
Thus, the BCRA has decided to keep both the monetary policy rate (at 26.75%) and the repo rates unchanged, in line with last week’s release. This measure seeks to consolidate this year’s disinflation process and inflation expectations for 2017.
The BCRA will continue to take anti-inflationary measures to make sure that a sustained disinflationary process will go on to achieve this year’s objective (1.5% monthly inflation rate or lower in the last quarter), and inflation expectations for 2017 will go on decreasing.
