Mexico: Inflation eases in April
May 9, 2018
Consumer prices fell 0.34% from the previous month in April, contrasting the 0.32% rise recorded in March and marking the biggest monthly drop in nearly two years. The decline was driven by a sharp fall in energy prices resulting from a seasonal decline in regulated electricity prices due to summertime subsidies. Moreover, produce prices fell for another month in April. Partially offsetting these were higher prices for non-food merchandise.
Notably, inflation eased for the fourth consecutive month, coming in at 4.6%—the lowest level in 16 months and below both market expectations and Banxico’s quarterly average inflation forecast of 4.8%. April’s headline reading came in below the 5.0% print recorded in March and was the result of softer price increases in all categories save for housing and education. Core consumer prices—which excludes volatile categories such as fresh food and energy—rose 0.15% from the prior month, softer than the 0.33% increase recorded in March. Meanwhile, core inflation slowed three-tenths of a percentage point to 3.7% in April.
Given April’s softer-than-expected price pressures and headline inflation undershooting Banxico’s forecast, a rate hike at the 17 May monetary policy meeting now appears more unlikely. That said, the Bank is expected to pay particular attention to the depreciating peso, which could become a major upside risk to inflation in the near term if the currency continues depreciating.