JP Morgan surprised with inflation forecast in Argentina in 2025: what figure does it expect if Milea’s plan works
American investment bank JP Morgan published a report on Argentine economy which gives an amazing prediction about the future inflation in the country. According to the analysis of its experts, if Government of Argentina If the economic stabilization plan is successfully implemented, inflation may decline significantly during 2025. This report, written in the context of high economic volatility, suggests that inflation could reach 2% on average per month next yearwhich implies an interannual rate of around 35% by the end of 2025.
Projection JP Morgan It is based on a number of economic conditions that, if met, will achieve this ambitious goal. Bank analysts They note that a “stabilization program” involving “unified foreign exchange market” and “a stable exchange rate regime that promotes a confidence shock” will be the fundamental basis for consolidating the path to slowing inflation. In this scenario, average monthly inflation is expected to fall to 2% during 2025.with an interannual rate of 35% at the end of the period.
However, US bank experts They also acknowledge that this scenario is far from guaranteed. In their report they warn that “The risk is possible delays in lifting capital controls.”which could have a negative impact on economic activity and the exchange rate gap. This situation, according to the analysis, could create additional pressure on inflation, especially as legislative elections approach in October 2025.
Before reaching 2025 JP Morgan also presents challenging prospects for the end of 2024. The bank estimates monthly inflation will average 3.7% in the final quarter of the year, with a slight acceleration towards the end of the year and early 2025. to a transition to a “new policy framework” and the expected “unification of the foreign exchange market”, a process that, although necessary, may cause price volatility. “Monthly inflation in the fourth quarter of 2024 is expected to average 3.7%.”the report says JP Morgan. This forecast corresponds to an annualized inflation rate of 125% by December 2024, reflecting the immediate difficulties the Argentine economy faces in combating persistent price increases.
The report highlights that one of the main factors in the expected slowdown in inflation by 2025 is the impact of more robust economic policies, supported by a stabilization program and the gradual lifting of capital controls. This last point is critical for JP Morgan analysts.who insist that continued “relative price” adjustments and progress towards the elimination of capital controls are necessary conditions for “consolidate a sustainable path to disinflation”.
The process of disinflation will not be immediate or easy. Actually, JP Morgan warns that one of the main risks is that a delay in implementing these reforms could worsen inflationary pressures in the short term. Despite this risk, the report remains optimistic about the longer-term outlook, noting that “in the context of a stabilization program and a sustainable exchange rate regime that is causing a confidence shock, there is scope for inflation to rise slowly to monthly levels.” average 2% through 2025.”
Analysis JP Morgan There are also some positive signs in the latest data. The firm notes that the first high-frequency data corresponding to October points to a new slowdown in inflation of around 3.1% per month. This behavior will be driven by a slowdown in food prices, which rose just 0.6% in the first week of the month.as well as due to lower gas and fuel prices, which decreased by 4.5% and 1% monthly, respectively.
Despite these encouraging signs, JP Morgan argues that in the short term it will be difficult to achieve monthly inflation below 3%, given the current economic policy framework. “Achieving monthly inflation below 3% in the coming months may be a challenge.”emphasized in the report.
Finally, the investment bank’s report concludes that while forecasts for 2025 are encouraging, lRisks remain high. Implementation of the stabilization program will be key to consolidating a sustained process of lower inflation, but delays in lifting capital controls and unifying the foreign exchange market could jeopardize these gains. Political risks will also play a major role ahead of legislative elections in October 2025. in the evolution of inflation.
As a result, JP Morgan predicts an optimistic scenario for 2025, but subject to a number of structural reforms that have not yet materialized.