'Cornered' Argentina introduces new inflation index

Argentina's government yesterday announced the adoption of a new inflation index in the country, following sustained criticism from the International Monetary Fund for manipulating economic statistics and understating the rate of inflation.

The economy minister announced monthly inflation of 3.7% for January last night local time – more than three times higher than the official monthly rate a year ago. Meanwhile, Argentina's Instituto Nacional de Estadística y Censos (Indec), published a new formula that analysts greeted with scepticism due to a lack of underlying data.

"People are trying to digest what the formula means," said Guillermo Vuletin of the Brookings Institution. He described the government's move as a "half-way of trying to make things right".

"It's true they acknowledge that inflation is higher than what they have been claiming for the last few years – that is progress, that is something to be happy about," Vuletin said, but cautioned: "Nothing else has changed. It seems to me this is one of these cases where someone does something just for signalling purposes, but without substance."

"They did it upside down," said Daniel Tenengauzer, head of regional research for the Americas at Standard Chartered. "They said we're going to release the numbers, then we'll release how we're going to be collecting this."

"The government has been cornered in a position where it couldn't sustain these lies forever. It realises it's in a position where it needs to do something to improve its relationship with the International Monetary Fund [IMF]," Vuletin said.

In December, the IMF said "while noting that Argentina has not adopted the measures called for by the Fund to address the inaccurate provision" of inflation and GDP data, it "recognised Argentina's ongoing work and intention to introduce a new national CPI [Consumer Price Index] in early 2014".

It also adopted a decision calling on Argentina to implement "an initial set of specified actions, including the public release of a new national CPI and revised GDP estimates, by end March 2014". It is unclear whether yesterday's change satisfies those criteria.

"The way it was executed raises even more questions… there is a lot of worry about how [the government] collects the data," said Tenengauzer. There could be "another accounting trick here".