BUENOS AIRES, Aug 11 (Reuters) - Argentina's inflation likely ran at a 2.0% monthly rate in July and is expected to decelerate very slowly as economic growth declines, a Reuters poll showed.
Limited progress against taming inflation after President Javier Milei's initial success at the start of his term has frustrated Argentines, particularly in Buenos Aires City where many businesses are also entering a slump.
The Consumer Price Index probably increased to 2.0% last month, picking up marginally from 1.9% in June, according to the median estimate of 26 economists polled August 5-10.
On the year, July's inflation is set to log an elevated 33.5% clip, the same as in the previous month. Official data is due on Thursday.
Although these readings are much lower than at the beginning of Milei's term in December 2023, inflation remains well above his single-digit annual target, adding to a deteriorating economic outlook.
'STICKY INFLATION'
Prices of most goods and services are adjusted for past changes in CPI causing "sticky" inflation to persist. At the same time energy cost pressures continue from the U.S.-Israeli war with Iran.
"For the rest of this year we see sticky inflation falling quite slowly, with inflationary inertia driven by widespread (CPI) indexation," said Milagros Gismondi, chief economist at Invecq Consulting.
"We are going through a long stabilization process but after next year's election there needs to be a confidence shock that allows for the recalibration of the economic program," she added.
Argentina holds a vote in October 2027 in which Milei will seek reelection. Besides the effects of the Middle East conflict, Latin America's No. 3 economy is set to face market pressures typical of an election year.
In response, Milei's team plans to keep "anchoring" the local currency by reinforcing Argentina's funding program and further restraining public sector wages to preserve fiscal austerity.
Their objective is to avoid a sharp drop of the Argentine peso, with a resulting surge of inflation above 2%, which could worsen already deteriorated social conditions, jeopardizing Milei's reelection bid, analysts said.
"The external context and portfolio dollarization will work against the government, so it will try to maintain the exchange rate and wage anchors for as long as possible," said Claudio Caprarulo, executive director at Analytica.
"If the government manages to maintain an average inflation rate next year close to what we have been seeing, below 2%, it would be a favorable scenario for them."
(Reporting and polling by Gabriel Burin and Hernan Nessi; Editing by Alison Williams)