Argentina Inflation Beats Forecasts at 2.9% as Iran War Adds Pressure

Argentina’s disinflation has stalled. February’s consumer price reading came in at 2.9% month-on-month — unchanged from January and above the 2.8% median estimate from Bloomberg’s analyst survey — extending to nine the number of consecutive months without any decline in the monthly rate. Annual Argentina inflation accelerated to 33.1% from 32.4%, also topping the 32.9% consensus, confirming that President Javier Milei’s early success in crushing triple-digit price growth has given way to a stubborn plateau that new external shocks now threaten to worsen. This is part of The Rio Times’ daily coverage of Brazil financial news English and Latin American financial markets.

Argentina Inflation Driven by Utilities and Food

The biggest monthly surge came from housing, water, electricity, gas, and other fuels, which jumped 6.8% — more than double January’s 3.0% — as the government continued withdrawing energy subsidies to protect its fiscal surplus. Gas alone rose 17% following a January adjustment announced by the Energy Secretary. Food and non-alcoholic beverages, the largest single component of Argentina’s CPI basket at 23% weighting, added 3.3%, driven particularly by meat prices. Accumulated inflation for the first two months of 2026 reached 5.9%, already more than half of the 10.1% annual target embedded in Milei’s budget — a figure virtually no private-sector economist considers achievable.

Iran War Shock Hits at the Worst Moment

The U.S.-Israel military operation against Iran has added a supply-side shock to an already difficult picture. Argentine fuel prices have risen approximately 6% so far in March, partly reflecting a monthly 1% fuel tax increase and catch-up adjustments, but increasingly driven by surging global crude costs. Consultant EcoGo estimates March inflation will hold at 2.9%, with 0.3 percentage points attributable to the oil price spike. Citigroup projected an annual inflationary impact of 0.9% from the conflict, while Barclays estimated 0.8%. State-controlled YPF, which commands over half the domestic fuel market, pledged to avoid price shocks at the pump, but its capacity to absorb higher crude costs indefinitely is limited given the company’s own investment needs.

The Structural Stickiness Problem

JPMorgan analyst Lucila Barbeito identified the core dilemma: goods inflation has fallen rapidly thanks to trade liberalization and lower import tariffs, but services — rents, utilities, healthcare — remain sticky because they track wages rather than the exchange rate. With fiscal revenues falling nearly 9% year-on-year as tax collection weakens, the government faces a painful tradeoff between maintaining its surplus through continued subsidy removal (which feeds inflation) and easing the pace of adjustment (which risks its credibility with markets). The departure of the statistics agency chief amid disputes over a new CPI methodology that would have given more weight to services added another layer of institutional uncertainty.

Central bank survey respondents project 26% annual inflation by year-end and 3.4% GDP growth in 2027, suggesting the market still believes in Milei’s broader stabilization program even as the monthly numbers plateau. Economy Minister Luis Caputo has argued that changing the CPI methodology now would be perceived negatively, effectively acknowledging that optics matter as much as data in a country with Argentina’s inflationary history. But the gap between 33.1% current inflation and a 10.1% budget target tells its own story: the easy gains from ending monetary financing are behind Argentina, and the hard work of breaking inertial expectations — now complicated by a Middle East war nobody planned for — lies ahead.