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Analyst Comments Following July Inflation Data

ARGENTINA
  • Goldman Sachs: The swift fiscal adjustment, the drag on real economic activity impacted by financial repression and the erosion of household disposable income, as well as high inventory levels should contain price pressures in the months ahead. However, GS note risks around the exchange rate which has moved towards an overvaluation remain a concern. Policy implementation remains critical, and GS believe tighter monetary policy, and a more flexible exchange rate regime, will be needed down the road to anchor the economy.
  • HSBC trim their 2024YE inflation forecast to 118% (from 130%). Authorities continue to emphasize their preference for reducing inflation over lifting FX controls and allowing more FX flexibility even if using the exchange rate as an anchor make some sectors non-competitive. HSBC are now assuming no significant increase in inflation during the rest of 2024.
  • Itaú’s inflation forecast stands at 130% for YE24. However, a continuation of the central bank's crawling peg policy (monthly depreciation pace of 2.0%), and the absence of demand-side pressures introduce downside risks to their forecast. Of note, survey-based inflation expectations continue to edge down.
  • JP Morgan see 3Q24 inflation average at 4.3%m/m, with a modest rebound entertained in 4Q24 (5% monthly average), assuming the transition into a new policy framework by year-end. This is consistent with a year-end 2024 inflation forecast at 135%oya. JPM see monthly core inflation averaging 3.3% in 2H24, a level that seems difficult to break absent further amendments to the policy framework. JPM view advancing toward promptly reducing the (still large) relative price misalignment and releasing capital controls as two necessary conditions to consolidate a sustainable disinflation path ahead.
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