Wednesday, February 9, 2011

The NYT and inflation in Argentina

The New York Times echoed a worry in various places about Argentina´s growing inflation. There is little doubt that inflation is higher than the government recognizes and that a combination of a weak nominal exchange rate and growing public deficits may have contributed to it. However, it is just surprising that the NYT implicitly mentions a risk of hyper-inflation and, moreover, places Brazil in a similar vote:

"Inflation has reared its head elsewhere in Latin America as well. Brazil, which was ravaged by hyperinflation of more than 2,000 percent as recently as 1994, has become increasingly concerned that inflation will exceed 5.5 percent this year."

Is a 5.5 percent really such a problem, particularly in times of soaring commodity prices and growing capital inflows?

1 comment:

Limoeiro said...

These worries about inflation in Brazil seem quite unreasonable. It's not only that inflation is not high for developing countries level (compare to India, which is around 10%/year), but also that it is within the margins of the inflation target system (the upper limit is 6,5%). Additionally, most of inflation comes from higher food prices, which in many other countries would not be considered core inflation. So, why the worry?

But the most puzzling point on this is how inflation-hawks can win the public debate on economic policy so easily, especially with the general public. If heterodox economists want to stand a chance in this debate, it's about time for them to come out and stress the importance of real variables...