Context

IPC Online is a private consultancy that measures monthly inflation in Bahía Blanca—an Argentine city with a population of approximately 312,224. Meanwhile, INDEC (Argentina’s official statistics bureau) measures the nation’s overall inflation rate and typically releases these figures on the 15th of the following month. For example, December’s inflation data is published on January 15.

Why is the 0.68% figure important?

Over the last 12 months, IPC Online has reported inflation rates remarkably similar to those eventually published by INDEC. For instance, in November, IPC Online registered a monthly inflation rate of 2.89%, and 12 days later, INDEC reported 2.4% for the same period.

Given this track record, it seems likely that if IPC Online is reporting 0.68% now, the official INDEC figure released in January may be close to that as well. Should that be confirmed, it would imply that Javier Milei managed to reduce Argentina’s monthly inflation rate from 25% down to 0.68% in only ten months.

Crawling Peg of 2%

Argentina currently devalues its currency by about 2% per month. This practice exists because there isn’t a free-floating exchange rate, there is an official exchange rate set by the government, and a separate, market-based exchange rate. The 2% monthly devaluation is intended to gradually align the official rate with the market rate.

According to Milei, Argentina’s monthly inflation has a “floor” of around 2%. This implies that if the inflation rate measures below 2%, the country would effectively be experiencing deflation. The gap between the official and free market exchange rates for the peso to dollar is the smallest it has been in years. Therefore, Milei suggests that he will reduce the crawling peg to 1% instead of 2% if December’s inflation rate is below 2.5%.

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