Argentina's inflation edges up in June, breaking a months-long streak in a blow to President Milei

BUENOS AIRES, Argentina (AP) — A closely watched measure of inflation in Argentina was stronger than the libertarian government of President Javier Milei would have hoped on Friday, as the official statistics agency reported prices edging up in June and breaking a months-long streak of declines.

Argentina's consumer price index rose 4.6% in June, slightly up from the rate of 4.2% in May, ending a five-month trend of cooling inflation that experts had attributed to a deepening recession brought about by Milei's harsh austerity. The International Monetary Fund predicts a 2.8% contraction this year.

President Milei has touted the falling prices over recent months as a victory in his fight against Argentina’s worst economic crisis in over two decades.

After Milei took office in December, monthly inflation peaked at 25%. But the price drop since hasn't offered much relief to ordinary Argentines as Milei presses on with a radical economic overhaul that involves slashing generous energy subsidies, scrapping price controls and devaluing the Argentine peso.

“The world that the government lives in, with all these numbers saying the economy is great, it's a fantasy,” said 34-year-old taxi driver Jose Rafael in Buenos Aires. “In the real world, this economy makes it really hard to feed my son.”

Friday’s government report showed Argentina’s annual inflation slowing a bit to just over 271% — still among the highest rates in the world.

Surging electricity and gas prices accounted for most of June's inflationary spike, the statistics agency said. Argentines have reported eye-watering utility bills after years of paying highly subsidized rates under left-leaning governments.

In stark contrast to Milei's program, those past Peronist administrations fixed prices and printed billions of dollars’ worth of pesos to fund a large deficit — fueling chronically high inflation.

Under Milei, Argentina's energy ministry reported in June that low-income households that previously paid just 5% of the real cost of electricity have started paying a third of it while middle-income households now cover at least half following Milei's removal of subsidies.

The government has also capped electricity consumption to qualify for subsidies, squeezing families as a cold front sweeps Argentina during the Southern Hemisphere’s winter.

The country's cost of living surged nearly 80% in the first five months of 2024 compared to the same period last year, the report also said. Prices in Buenos Aires shops and restaurants have reached levels comparable to the United States, even as the country offers just a fraction of the wages.

In another warning sign, the peso fell Friday to another record low against the dollar, hitting 1,500 on the black market and capping another week of volatility after holding steady in the first few months of the year.

The steep fall in Argentina’s currency means the closely watched gap between the black market rate and the official exchange rate, currently 919 pesos to the dollar, has widened to over 60%. That complicates Milei's goal of eventually lifting Argentina's strict currency controls to restore investor confidence.

Milei wants the IMF — to which Argentina already owes a staggering $44 billion — to step in with a new loan to support his plans to remove capital controls, which cause major distortions in Argentina’s economy.

But as uncertainty remains over the future of Milei's economic program, the IMF dampened expectations of a new deal on Thursday.

“The staff will engage in discussions on a possible new arrangement as we would with any IMF member," the fund's spokesperson, Julie Kozack, told reporters when asked about the state of negotiations. "At this stage, there is no specific timeline for those discussions.”