May 10, 2016 / 7:37 PM / 2 years ago

Argentina's Buenos Aires inflation vaults higher in April amid subsidy cuts

BUENOS AIRES, May 10 (Reuters) - Monthly inflation in Argentina’s main population center of Buenos Aires approached 7 percent in April, according to private estimates used as a reference while the country suspends official data releases and revamps its discredited statistics agency.

It would be the highest rate of inflation since the country’s 2001-02 financial meltdown that sparked riots in the capital and threw millions of middle-class Argentines into poverty.

The principal cause of the spike in consumer prices last month was the lifting of energy and transportation subsidies in the greater Buenos Aires region by the country’s new President Mauricio Macri.

“April inflation was the highest in 14 years, due to the elimination of subsidies, which increased utility prices,” Gabriel Zelpo, an economist at local consultancy Elypsis, said on Tuesday. The firm estimates inflation for the month at 6.9 percent compared with 3.1 percent in March.

Other analysts consulted by Reuters estimated April inflation at between 6 percent to 7 percent.

The government says the surge in consumer prices was temporary but it forecasts inflation for full-year 2016 at 25 percent, a projection that many analysts call optimistic.

“May inflation will be half of what it was in April, when we saw the impact of lifting the subsidies,” Interior Minister Rogelio Frigerio told local radio. “In June and July, we will be at 2 percent.”

Macri, elected in November on promises of improving investor confidence in Latin America’s No. 3 economy, has ordered a revamp of the Indec statistics agency after years of issuing economic indicators widely rejected as inaccurate by market watchers.

In June, the government will unveil a new official consumer price index.

Macri has loosened price controls along with ending utility subsidies, moves that have hit the poor particularly hard.

He promises to bring monthly inflation down to near 1 percent in the second half of the year. His tactic of raising interest rates while trimming public payrolls has slowed the economy over the short term.

The opposition has staged protests, including a supermarket boycott on Tuesday, but it currently lacks a leader to unify those who disagree with Macri’s fiscal policies.

Wall Street has praised Macri’s policies as a much-needed correction to years of government intervention and idiosyncratic economic policy under his leftist predecessors.

“Inflation in the second half of the year will be lower,” said local economist Orlando Ferreres. “You can explain this to people, but that doesn’t lessen the impact it is having on their pocketbooks now.” (Writing by Hugh Bronstein, editing by G Crosse)

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