Will 1.5% monthly inflation be sustained?: The three key factors the government is closely monitoring

After May registered the lowest inflation rate in the last five years, private consulting firms—which had predicted higher figures than those published by INDEC—anticipated a continued slowdown , a strategy the government will seek to accentuate ahead of the October elections. They predict the rate will remain below 2% monthly , although they doubt it will reach 1.5% again in June .

Food prices rose again in the first half of June. This followed the deflation reported in certain consumer goods last month, an incentive to boost sales and compete with rising imports.

Food is a variable closely monitored by the government , as it has the greatest impact on the CPI measurement—with a weighting of almost 24% —and which explained its slowdown in May, following warnings to food companies and meetings with supermarkets to contain increases following the end of the currency controls.

Following the 0.5% increase reported by INDEC in May and the 0.4% drop in the basic basket, LCG reported a 1.7% increase in food and beverage prices in the second week of June in the city. The first seven days of the month had started with stable prices.

Oils ( 5.9% ), vegetables ( 4% ) , and meats ( 1.3% ) saw the largest increases . Thus, the average inflation rate for the last four weeks for this sector is 1.6% , three times higher than the official inflation rate for May.

“In recent years, only during the pandemic and in 2017 did monthly inflation start at 1%. There are immediate factors contributing to this result: the deflation of some foods and seasonal goods , and public messages aimed at curbing the momentum of markups , with the reversal of prepaid health insurance increases and announcements from supermarket chambers, as well as wage negotiations,” LCG analyzed.

"What will happen in the coming months? When services prices increase more than goods prices , prices have to catch up . This usually happens with increases in goods prices rather than deflation in services prices, which predicts an inertial floor. Sooner or later, we'll have low inflation. But these factors shouldn't be ignored. To the extent that demand allows, margins will recover ," he warned.

For its part, Analytica reported a weekly increase of 0.1% in food and beverages in Greater Buenos Aires, bringing the increase to 1.5% over the last four weeks. It explained that the largest increases were in coffee, tea, yerba mate, cocoa ( 5% ), and sugar, sweets, and chocolate ( 3.1% ). More moderately, increases were seen in fish and seafood ( 1.1% ) and fruit ( 0.3% ).

In this regard, in addition to the evolution of food prices—we'll have to wait and see whether the seasonal decline in fruits and vegetables continues— what happens with services will also have an impact , as they doubled the general CPI ( 2.7% ) in May. International oil prices will also have an impact : Brent rose more than 7% following the conflict between Israel and Iran, which could lead to a rise in prices at the pumps. The other variable to monitor is core inflation , which excludes regulated and seasonal prices and stood at 2.2% in May.

"Economic policy is focused on the short term, on achieving 1% in October, aiming for exchange rate stability. Months of 1.5% are likely to be repeated, perhaps not in June , with increases in regulated services, such as electricity and gas rates, and transportation," said Ricardo Delgado , president of Analytica.

" I think it's unlikely that the May figure will be repeated in June , when prices for vegetables and gasoline fell, as well as the Hot Sale. Later on, in July, inflation tends to rise due to the winter holidays. Beyond that, as long as monetary and fiscal control is maintained, the trend is downward. Fuel is a relevant factor, as will the exchange rate in the third quarter, when the harvest ends, in addition to the political issue with the elections," added Camilo Tiscornia , director of C&T Economic Advisors .

“ June could be a few tenths higher , even though this month is seasonally lower. In May, many prices had to adjust downwards, following the increases in April and March. That caused May to yield 1.5% . We're sure to see another index approaching 1% by the end of the year. It could only break 1% in early 2026,” concluded Aldo Abram , director of Fundación Libertad y Progreso .