Price freezes may not directly reduce inflation in Argentina, but they could influence inflationary psychology and expectations
an end to the price madness,” says Sonia Valverde, a mother of three, at a supermarket in Buenos Aires. She points to a government sticker advertising new price controls, which have frozen the price of 64 products, including sachets of milk. The only difficulty is that no sachets remain on the shelf.
Mr Macri’s popularity is headed in the other direction. An opinion poll last week suggested he would lose October’s election to Ms Fernández, despite corruption charges against her. To defeat her, Mr Macri has chosen to emulate her, demanding that shops refrain from raising “essential prices” for six months. In a meeting with supermarket bosses, he insisted that he would win by 52% to 48%—the kind of thin margin that makes retailers nervous.
But the controls may still have an indirect impact, through psychology and politics. Argentina’s macroeconomic policies are now consistent with lower inflation: the fiscal deficit is narrowing, interest rates are painfully high and thehas boosted the central bank’s foreign-exchange reserves. But inflation has its own momentum: it is high, because it was high, and is expected to remain so.
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