Annual inflation in Mexico slows down in the first half of October

First modification: 10/25/2022 – 04:18

One lime and one sand. Mexico’s annual inflation slowed more than expected in the first half of October, but remains above the central bank’s target rate. In parallel, the core index rose, according to the National Statistics Agency (INEGI).

The price index in Latin America’s second-largest economy fell to 8.53% from 8.64% in the second half of September. It was also below the daily Reuters news agency poll that projected 8.63%.

Compared to the previous fortnight, Mexican consumer prices rose 0.44% in early October, according to the data.

“With the measures we are taking, we are seeing a slowdown in inflation,” President Andrés Manuel López Obrador reacted at a press conference, arguing that his pact with merchants to contain the prices of basic foodstuffs worked. “A little, but it’s not going up anymore,” he added.

But the core price index, which strips out some volatile food and energy prices, rose 0.42% in early October, slightly above market expectations of 0.35%.

The annual core inflation data was 8.39%, above forecasts of 8.31%

Jonathan Heath, a member of the board of directors of the Bank of Mexico, Banxico, assured on Twitter that core inflation “remains the greatest concern”, noting that the fall in headline inflation is due entirely to a decline in the non-core index. , which in turn is explained by the drop in international oil prices.

“A one-time drop in the price of a single good doesn’t begin to solve the big problem of inflation, which is a generalized and sustained rise in prices,” Heath said.

Since June 2021, the central bank of Mexico continues to raise interest rates to curb inflation, a trend followed by the rest of the world’s central banks. Inflation for 2020 closed at 3.15%, while in 2019 inflation was 2.83% and in 2018 consumer prices rose 4.83%.

Currently, the reference rate is at 9.25%, and the latest minutes of Banxico’s monetary policy meeting showed that the board of directors is considering future hikes amid inflation risks.

For Jason Tuvey, Economist senior Emerging Markets ‘Capital Economics’, a 75 basis point hike in November is possible as the US Federal Reserve continues its aggressive hikes.

“But these latest figures suggest that the end of the tightening cycle is not too far off,” Tuvey added. Andrés Abadía, chief economist for Latin America at ‘Pantheon Macroeconomics’, expects that the base effects, the weakening of domestic demand and the lagged effect of the tightening of financial conditions will continue to push down inflation in Mexico.

“Underlying pressures are finally stabilizing, and we continue to believe that inflation will continue to decline consistently over the coming months,” he concluded.

with Reuters