Mexico: Inflation edges down in September
October 9, 2017
Consumer prices rose 0.31% from the previous month in September, which was below both the 0.49% increase recorded in August and market expectations of a 0.44% rise in September. The surprise largely reflected reductions in public transport and mobile phone charges as well as lower pass-through effects of the peso, with monthly price increases for non-food merchandise goods losing further steam in September. These improvements were partially offset by robust increases in education prices and energy costs.
Inflation eased from a 16-year high of 6.7% in August to 6.3% in September, the first time inflation softens since last June and the lowest reading in four months. The figure showcased the long-touted effects of a favorable base effect on agricultural products, with inflation for that category rapidly decelerating in September. The closely-monitored core consumer price index—which excludes volatile categories such as fresh food and energy—rose 0.28% in September from the previous month, which was slightly above the 0.25% increase observed in August. Core inflation softened to 4.8% in September following August’s 5.0% figure.
The stabilization in core prices and a favorable base effect on some non-core products confirms the overarching narrative among our panelists that inflation had already peaked in August. Banxico’s front-loading of interest rate hikes has proven successful in anchoring inflation expectations while the peso, despite being under fire in recent weeks, has firmed up ever since plunging following the election of Donald Trump as U.S. President. Barred a heavy currency sell-off due to an unfavorable outcome of NAFTA talks or political events ahead of next year’s election, inflation should continue decelerating in the months to come and into 2018.
Author: David Ampudia, Economist