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Argentina inflation accelerates, raising reputational concerns for central bank

Argentina's inflation rate accelerated to 1.9% during the month of September as the cost of food, clothing and school jumped higher, data from Indec, the country's national statistics agency, showed Oct. 13.

The monthly result, which marks an increase from August's 1.4% pace, brought Argentina's inflation growth to an accumulated 17.6% for the first nine months of 2017, already above the top end of Banco Central de la República Argentina's 12% to 17% target range for the whole year. Clothing and footwear, which rose 3.8% nationally, and education, which jumped 3.7%, were among the main drivers of the September increase.

The release of the data renewed questions over the central bank's ability to control Argentina's rampant inflationary issues, with daily La Nacion saying the September result "further hampers the central bank's credibility to set future inflation benchmarks."

Similarly, El Cronista quoted economist José Luis Espert as expressing concern that BCRA could suffer a "loss of reputation" for failing to meet its inflation targets. The central bank had aimed to lower the monthly inflation rate to 1% in the final quarter of 2017, though the latest result suggests that is highly unlikely.

It also lowers the odds that the central bank will see 2018's inflation rate fall to its annual target of 8% to 12%.

A survey of economists published earlier in October showed median inflation expectations of 22% for 2017 and 15.8% for 2018, according to a Reuters report.

"If the government wants these inflation targets, it has to be tougher on tax matters," Espert reportedly said in a radio interview.

The Indec data came out just days after the BCRA decided to hold its benchmark rate unchanged at 26.25%. In doing so, it noted that core inflation during the third quarter was likely to come in above target levels, but that it should slow from previous quarters.