July’s inflation rate of the consumer price index (CPI) for Greater Buenos Aires was released last week, and is used by the BCRA for assessing the achievement of its inflation targets. The inflation rate was 2%, plummeting down against June (3.1%), and standing slightly below market expectations as published by the BCRA in the latest Market Expectations Survey (Relevamiento de Expectativas de Mercado, REM). Similarly, core inflation went down from 3% in June to 1.9% in July.
The inflation rates of other districts were also released in the past week; these other rates are also monitored by the BCRA with a view to obtaining a more comprehensive picture of the inflation dynamics. In line with inflation data gathered by the province of Córdoba, where the inflation rate plunged from 2.7% in June to 1.7% in July, the monthly inflation rate in the Autonomous City of Buenos Aires dropped from 3.2% in June to 2.2% in July, the core component plummeting from 3.6% to 2.3%. In turn, the inflation rate in the province of Mendoza released last week went up from 2% in June to 2.3% in July. It is worth noting that June’s inflation rate had already shrunk vis-à-vis 5.1% in May.
In addition, the wholesale price and construction cost indices for the month of July were published today. Wholesale prices showed a slowdown in all versions. The Wholesale Domestic Price Index (IPIM) decreased from 2.9% in June to 2.7% in July (with an incidence of more than 1% of oil and gas), the Basic Domestic Wholesale Price Index (IPIB) from 3.2% in June to 2.9% in July, and the Producer Basic Price Index (IPP) from 3.6% in June to 2.8% in July. For its part, the Construction Cost Index rose by 1%, in line with previous months.
The significant drop in July inflation confirmed what had been anticipated by indicators and estimates from state and private sources mentioned in previous communications. These same sources suggest today that the disinflation process continues clearly in the first two weeks of August.
Taking this information into account, the BCRA decided to reduce its monetary policy rate by 50 basis points to 29.25% and its repo rates by the same magnitude. The monetary authority will continue to proceed with caution, seeking to ensure that the disinflation observed in recent weeks is maintained over time.
The BCRA will continue to take anti-inflationary measures to make sure that a sustained disinflationary process will go on to achieve the objective for this year (1.5% monthly inflation rate or lower in the last quarter).
