Argentine Inflation Meddling Seen Persisting

According to Argentine press, Beatriz Paglieri, the person in charge of the CPI at INDEC, will be removed from her position. Although she had been seen as responsible for altering CPI data, analysts do not expect significant change for the better. “The removal of Paglieri from INDEC, if it materializes, would be mostly an indication that the government is trying to give in to the market,” says Credit Suisse. “[It] would not mean that the alleged intervention in the CPI data would cease altogether, at least in the near term, in our view,” the shop adds. “The decision should not be considered, in our view, as a first step toward more transparency in INDEC, although alleged manipulation of inflation has become a liability for the government,” says Merrill Lynch. Merrill expects the spread between “true” and “reported” inflation to contract in 2008, from 900bp-1,000bp (18% “true” versus 9% “real” inflation) to closer to 600bp-700bp in 2008 as reported inflation rises to roughly 12%.