Mexico: Inflation eases for third consecutive month in March
April 9, 2018
Consumer prices rose 0.32% from the previous month in March, just below the 0.38% increase recorded in February and the third sequential moderation in month-on-month consumer price growth. March’s print represented the lowest reading in six months. The deceleration stemmed from softer price increases across most categories, led by a strong slowdown in energy prices, which was in turn led by a sizeable drop in liquified gas prices. Prices for fruits and vegetables experienced a sequential drop in March, but at a slower rate than in February. The decline was partially offset by rising prices for some services, particularly in tourism.
Inflation also eased for the third consecutive month, coming in at 5.0%, the lowest level since February 2017, and undershooting analysts’ expectations of 5.1%. The headline number was also below the 5.3% print recorded in February and was the result of softer price increases in all categories except for housing and other services, with a notable slowdown in food price inflation.
The core consumer price index—which excludes volatile categories such as fresh food and energy—rose 0.33% in March from the previous month, below the 0.49% increase recorded in February. Core inflation slowed three-tenths of a percentage point to 4.0% in March, with lower core goods inflation leading the way yet again amid softer peso-induced pressures. Rapidly declining producer inflation should see core price pressures moderating further in H1. Core services inflation, however, was stickier in March, with prices steady at 3.5% growth.
The stronger-than-expected deceleration in headline inflation could prompt Banxico to pause the hiking cycle at its 12 April monetary policy meeting and keep interest rates steady at 7.50%.
Mexico Inflation Forecast
The Central Bank expects inflation to moderate gradually throughout this year and end 2018 at 3.8%, then converge to its 3.0% target by the second quarter of 2019. Banxico expects inflation to end 2019 at 3.2%. Panelists surveyed by FocusEconomics expect inflation to end 2018 at 4.0%, which is up 0.1 percentage points from last month’s forecast. For 2019, the panel sees year-end inflation at 3.5%.